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If this is really a factor in the stock price, then that company is toast. When an employee is hired, the assumption is that that employee's all-in hiring cost
by landryraccoon 6y ago
If this is really a factor in the stock price, then that company is toast.
When an employee is hired, the assumption is that that employee's all-in hiring cost is less than the increase in value for all shareholders. That means if you pay an employee $250K a year, including stock, the shareholders better be getting more than $250K back in value.
By your reasoning, the shareholders are losing more by dilution than they gain back by enterprise value. If that's the case they should fire everyone and close their doors, since there's no RSU dilution at all with zero employees.
On the other hand, if employees were hired with the assumption that they were worth the price, then any layoffs should rationally reduce the stock value - because even though you get the RSUs back, the employees must have been worth more than those RSUs or it was a mistake to hire them in the first place.
- vmception 6y agoNice logic, the only reality is that wall street tolerated being dumped on by employees in the theoretically high growth tech sector. no voting rights, no dividends, create shares, dump on investors the limits of this tolerance was pushed and pushed in the macro environment of there being nothing else to invest in if share price goes up, profitability "just a few quarters away", the employee value proposition or executive handcuffs are not factored in for a long time the "share price" trend of tech companies has not been important because a steady share price means that it is amazing that wall street tolerates being dumped on and keeps placing large enough bids to absorb the constant sell pressure from an open spigot of unlimited authorized shares to create. even a moderate down trend is okay since the employees are dumping shares monthly instead of stuck a long for the ride for at least a year. rising share prices just being icing on the cake.
- landryraccoon 6y agoThat still means the company is toast. You're basically arguing that companies were way overpaying for their employees, and their stock price was inflated to begin with. The stock should still go down in that case.
- vmception 6y agoI'm not arguing that at all. I am recognizing the psychology in the macroeconomic environment and helping you understand why you are on the wrong side of the market today.