![]() “There are a variety of ways to look at this issue, but our general bias is that the lower the dependence on stock-based compensation, the higher the quality of the P&L,” he wrote in a report in April, using shorthand for the income statement. Mahaney, the RBC analyst, said the use of so much stock-based compensation was a negative signal. But absent this accounting method, uglier headlines would have dragged down the stock price even further, along with the morale of all those employees whose incomes were dependent on it. The company certainly deserves credit for building a global network with 430 million users and becoming a household name. It is not hard to believe that LinkedIn, barring this deal with Microsoft, would have soon been using the more realistic version of its earnings - and, in so doing, reporting more losses. “Stock-based compensation plays an important role in how we compensate our employees, and therefore we view it as a real expense for the business,” David Wehner, Facebook’s chief financial officer, said in an earnings call. In April, Facebook, which also used to steer investors to use adjusted-Ebitda earnings numbers that also excluded the cost of stock-based compensation, announced that it was changing its policy. Buffett also criticized analysts who “play their part in this charade, too, parroting the phony, compensation-ignoring ‘earnings’ figures fed them by managements.” The very name says it all: ‘compensation.’ If compensation isn’t an expense, what is it? And, if real and recurring expenses don’t belong in the calculation of earnings, where in the world do they belong?” Stock-based compensation, he said, “is the most egregious example. Buffett wrote in his annual report published this year. “It has become common for managers to tell their owners to ignore certain expense items that are all too real,” Mr. Buffett have been highly critical of the practice. LinkedIn justifies the practice by saying that stock-based compensation “is noncash in nature” and that excluding it from its earnings calculation provides “meaningful supplemental information regarding operational performance and liquidity.”īut investors like Warren E. ![]() Companies like Google, Amazon and Facebook paid out about 15 percent of operating income, or well under 10 percent of revenue. LinkedIn paid out $510 million in stock-based compensation last year over the last two years, that stock-based compensation represented a whopping 96 percent of operating income, or 16 percent of revenue, according to Mr. The company purposely strips out the cost of stock-based compensation, which has the effect of turning losses into gains. That’s because LinkedIn steers investors to focus on what’s known as its adjusted Ebitda, or non-GAAP earnings. You wouldn’t know that if you only glanced at LinkedIn’s news releases. This year looks worse, our columnist says. Tips for Investors: In 2022, conditions were heavily in stock pickers’ favor, but most actively managed stock mutual funds trailed the market.May I Speak to a Human?: Younger investors who are navigating market volatility and trying to save for retirement are finding that digital investment platforms lack the personal touch.Value and Growth Stocks: Eight tech giants are no longer “pure growth” stocks, while Exxon and Chevron are, according to a new study.They’re also potentially warning of a recession. Bond Trading: Wild swings in the Treasury market are unlike anything many investors have ever seen.Our Coverage of the Investment World The decline of the stock and bond markets this year has been painful, and it remains difficult to predict what is in store for the future. LinkedIn’s employees are paid largely in stock, and therein lies the rub: Around the company’s new 26-story skyscraper that opened in downtown San Francisco in March, as well as the corporate headquarters in Mountain View, Calif., there have been persistent whispers about whether LinkedIn could retain its top talent as the marketplace clobbered their incomes. The rapid devaluation has posed more than just a problem for investors. The share price had hovered at $225 at the beginning of 2016 a month later it briefly got close to $100. On one grim day in early February, LinkedIn’s stock price plummeted more than 40 percent after it forecast weaker-than-expected growth for the year. That would be the company’s struggling stock price and its reliance - some might say overreliance - on stock-based compensation. ![]() Jeff Weiner, LinkedIn’s chief executive, wrote a lengthy memorandum to his employees Monday morning, ticking off a list of reasons behind the surprise decision to sell the company to Microsoft for $26.2 billion: Most important, he said, was the heft that Microsoft gives LinkedIn “to control our own destiny.”īut there may have been another reason that he left unspoken. ![]()
0 Comments
Leave a Reply. |