REUTERS: An app for stock trading According to a regulatory filing and four executive compensation experts who reviewed it, Robinhood Markets Inc is providing its billionaire founders four more years to fulfill share price benchmarks that trigger stock awards worth US$1.4 billion. According to the executive compensation specialists who studied the file, the company promised to reward CEO Vladimir Tenev and chief creative officer Baiju Bhatt 13.8 million shares if the company’s share price reached particular price levels at the time of its first public offering (IPO).
According to the filing and executive compensation experts, Robinhood changed the conditions of the stock awards in late May so that the founders will get a second chance to acquire the shares if the IPO price does not satisfy the plan’s benchmarks.
According to the petition and one of the compensation experts, the adjustment could cost Robinhood around US$569.1 million in accounting expenditures over time. According to the document, the business made the modification to “keep the incentives” of the stock reward program. The IPO would increase the wealth of Tenev, 34, and Bhatt, 36, thanks to their stakes in the company, according to Sarah Anderson, a program director at the Institute for Policy Studies whose research focuses on executive pay and inequality. She added that changing the stock award terms to reward them even more was questionable. “How much more of an incentive is this going to be for you to do a good job once you’re already a billionaire?” Anderson wondered. Tenev and Bhatt each have a net worth of $1 billion, according to Forbes.
Tenev and Bhatt were not available for interviews, according to a Robinhood representative.
According to the filing and executive compensation experts, Tenev and Bhatt would have received some stock if Robinhood had been priced at a minimum of US$30.45 per share in the IPO. For Tenev and Bhatt to get the entire stock award at US$1.4 billion, it would have to be priced at US$101.50 per share. Robinhood has not yet revealed its IPO pricing range, but according to the filing, its board concluded the fair value of its shares at the end of December was US$16.33. According to the filing, Tenev and Bhatt would have until the end of 2025 to meet the share price targets under the updated plan. The improvements made by Robinhood were justified by certain CEO compensation experts. According to Eric Hoffmann, a vice president at compensation expert Farient Advisors LLC, the revised stock award program may be a better method for Robinhood to get the most out of its founders for the benefit of its shareholders in the long run, even if it costs the company money.
Because attaching the awards entirely to the IPO could have incentivized the founders to keep the firm private until they could reach their share price targets or push for an unsustainable value in the stock market debut, this is the case.
“This does incentivise them to drive up the stock price and increase shareholder wealth over a longer period of time. Many people would say that this is a positive thing “Hoffmann remarked. INVESTORS IN INITIAL PUBLIC OFFERINGS IPO investors frequently analyze the corporate governance systems of technology businesses, particularly executive compensation schemes. Robinhood is set to go public later this month, hoping to cash in on an amateur investor craze for so-called meme stocks like GameStop Corp, which helped the company quadruple its trading revenue in the first quarter. “Changes to ‘in-flight’ equity awards are frequently regarded adversely by investors,” said Yonat Assayag, a partner at executive compensation firm ClearBridge Compensation Group LLC. More stock rewards for the founders could be on the way. According to the petition, Robinhood approved new stock grants for Tenev and Bhatt in late May connected to more ambitious share price goals ranging from US$120 to US$300. The awards are worth US$4.7 billion for Tenev and US$2.8 billion for Bhatt. Tenev and Bhatt will not be granted any additional equity awards until the eighth anniversary of when they acquired portion of the stock, according to the filing, unless “changes in circumstance or in our business.” In April, Tenev and Bhatt, who established Robinhood in 2013, lowered their yearly base salary from US$400,000 to US$34,248, the median wage in the United States in 2019. (Jessica DiNapoli contributed reporting from New York; Ross Kerber contributed additional reporting from Boston; Greg Roumeliotis and Cynthia Osterman edited the piece.)/n
