Robinhood Markets Inc stock trading app gives its billionaire founders four more years to meet stock price targets that trigger $ 1.4 billion stock awards, file says regulatory and four executive compensation experts who reviewed it.

The company had agreed to award CEO Vladimir Tenev and Creative Director Baiju Bhatt 13.8 million shares subject to its share price reaching certain price levels at the time of its initial public offering (IPO), executive compensation experts who analyzed the case told Reuters. interviews.

Robinhood changed the terms of the stock awards at the end of May so that founders have a second chance to receive the shares if the IPO price does not meet plan thresholds, according to the filing and compensation experts leaders.

The change could cost Robinhood around $ 569.1 million in accounting expenses over time, according to the filing and one of the compensation experts. The company made the change to “maintain the incentives” of the stock award program, the file said.

Sarah Anderson, program director at the Institute for Policy Studies whose research focuses on executive compensation and inequality, said the Robinhood IPO would add to the wealth of Tenev, 34, and Bhatt, 36 years, thanks to their participation in the company, and this evolution the conditions of attribution of shares to reward them more were questionable.

“Once you’re already a billionaire, how much more incentive will it be for you to do a good job,” Anderson said. Forbes estimates Tenev and Bhatt’s net worth at $ 1 billion each.

A Robinhood spokesperson declined to comment or make Tenev and Bhatt available for interviews.

According to the original plan, Robinhood would need to be valued at a minimum of $ 30.45 per share in the IPO for Tenev and Bhatt to receive shares, according to the filing and executive compensation experts. It would need to be valued at $ 101.50 per share for Tenev and Bhatt each to receive the full stock award worth $ 1.4 billion.

Robinhood has yet to disclose its IPO price range, but in the filing, it said its board of directors determined the fair value of its shares to be $ 16.33 at the end of December. Under the amended plan, Tenev and Bhatt will have until the end of 2025 to meet share price targets, according to the filing.

Some executive compensation experts have championed the changes made by Robinhood. The modified share award program may be a better way for Robinhood to make the most of its founders for the benefit of its long-term shareholders, even if it ends up costing the company dearly, according to Eric Hoffmann, vice-president. -President of compensation consultant. Farient Advisors LLC.

Indeed, tying the rewards only to the IPO could have prompted the founders to keep the company private until they could meet the stock price targets or push for an unsustainable valuation during the transaction. their debut on the stock market.

“It gives them an incentive over a longer period of time to drive up the share price and increase shareholder value. A lot of people would say that’s a good thing,” Hoffmann said.

BROKER IPO INVESTORS

The corporate governance arrangements of tech startups, including their executive compensation structures, are often scrutinized by IPO investors. Robinhood is expected to launch its IPO later this month, seeking to capitalize on the amateur investor frenzy for so-called memes stocks such as GameStop Corp, which quadrupled its trading earnings in the first quarter.

“Changing ‘in-flight’ share awards is often viewed negatively by investors,” said Yonat Assayag, partner of executive compensation consultant ClearBridge Compensation Group LLC.

Other stock awards may be on the horizon for the founders. In late May, Robinhood approved additional stock awards for Tenev and Bhatt tied to more ambitious stock price targets ranging from $ 120 to $ 300, according to the filing. For Tenev, the value of the rewards is $ 4.7 billion and for Bhatt, $ 2.8 billion.

Robinhood said on the record that Tenev and Bhatt would not be granted any further grants of shares until the eighth anniversary from when they received a portion of the shares, unless there are “changes. circumstances or in our activities “.

Tenev and Bhatt, who founded Robinhood in 2013, cut their annual base salary in April from $ 400,000 to $ 34,248, which was the median salary of American workers in 2019.