Robinhood Gives Founders Second Chance at $1.4 Billion Windfall

Robinhood is giving its billionaire founders 4 extra years to hit share worth targets that set off inventory awards value $1.4 billion (roughly Rs. 10,450 crores), in line with a regulatory submitting and 4 govt compensation consultants who reviewed it.

The firm had agreed to award CEO Vladimir Tenev and chief inventive officer Baiju Bhatt 13.8 million shares contingent on its share worth reaching sure worth ranges on the time of its preliminary public providing (IPO), the manager compensation consultants who analysed the submitting advised Reuters in interviews.

Robinhood tweaked the phrases of the inventory awards in late May so the founders will get a second probability to obtain the shares if the IPO worth doesn’t meet the thresholds below the plan, in line with the submitting and the manager compensation consultants.

The change might price Robinhood roughly $569.1 million (roughly Rs. 4,250 crores) in accounting bills over time, in line with the submitting and one of many compensation consultants. The firm made the change to “maintain the incentives” of the inventory award program, the submitting states.

Sarah Anderson, a programme director on the Institute for Policy Studies whose analysis focuses on govt pay and inequality, mentioned Robinhood’s IPO would add to the wealth of Tenev, 34, and Bhatt, 36, because of their stakes within the firm, and that altering the inventory award phrases to reward them additional was questionable.

“Once you are already a billionaire, how much more of an incentive is this going to be for you to do a good job,” Anderson mentioned. Forbes pegs the web value of Tenev and Bhatt at $1 billion (roughly Rs. 7,460 crores) every.

A Robinhood spokesperson declined to remark or to make Tenev and Bhatt accessible for interviews.

Under the unique plan, Robinhood must be priced at a minimal of $30.45 (roughly Rs. 2,270) per share within the IPO for Tenev and Bhatt to obtain some inventory, in line with the submitting and the manager compensation consultants. It must be priced at $101.50 (roughly Rs. 7,575) per share for Tenev and Bhatt to every obtain the whole inventory award value $1.4 billion (roughly Rs. 10,450 crores).

Robinhood has not but disclosed its focused IPO worth vary, however within the submitting it mentioned that its board decided the truthful worth of its shares was $16.33 (roughly Rs. 1,220) on the finish of December. Under the modified plan, Tenev and Bhatt may have till the top of 2025 to hit the share worth targets, the submitting confirmed.

Some govt compensation consultants defended the adjustments that Robinhood made. The amended inventory award program could also be a greater approach for Robinhood to get probably the most out of its founders for the good thing about its shareholders long-term, even when it finally ends up costing the corporate, in line with Eric Hoffmann, a vice chairman at compensation guide Farient Advisors LLC.

This is as a result of tying the awards solely to the IPO might have enticed the founders to maintain the corporate personal till they might hit the share worth targets or push for an unsustainable valuation within the inventory market debut.

“This does incentivise them over a longer period of time to drive up the stock price and increase shareholder value. A lot of people would argue that’s a good thing,” Hoffmann mentioned.

Courting IPO buyers

The company governance preparations of know-how startups, together with their govt compensation constructions, are sometimes scrutinized by IPO buyers. Robinhood is predicted to launch its IPO later this month, looking for to capitalise on an novice investor frenzy for so-called meme shares comparable to GameStop Corp that fueled a fourfold soar in its buying and selling income within the first quarter.

“Changing ‘in-flight’ equity awards is often viewed negatively by investors,” mentioned Yonat Assayag, a associate at govt pay guide ClearBridge Compensation Group LLC.

More inventory awards may very well be within the offing for the founders. In late May, Robinhood accredited extra inventory grants for Tenev and Bhatt tied to extra formidable share worth objectives starting from $120 (roughly Rs. 8,960) roughly Rs. to $300 (roughly Rs. 22,390), in line with the submitting. For Tenev, the worth of the awards is $4.7 billion (roughly Rs. 35,070 crores), and for Bhatt, $2.8 billion (roughly Rs. 20,900 crores).

Robinhood mentioned within the submitting that Tenev and Bhatt wouldn’t be granted every other fairness awards by way of the eighth anniversary from once they obtained among the inventory, except there are “changes in circumstance or in our business.”

Tenev and Bhatt, who based Robinhood in 2013, slashed their annual base salaries in April from $400,000 (roughly Rs. 3 crores) to $34,248 (roughly Rs. 25.5 lakhs), which was the median wage for US employees in 2019.

© Thomson Reuters 2021