Earlier this week, Facebook completed its acquisition of WhatsApp, with a final valuation of the deal coming in just under $22 billion. Yes, that is “billion” with a “b.” If you guessed that the bulk of that $22 billion comes in the form of stock, you would be right. Facebook paid $4.59 billion in cash, and the remaining $17 billion was paid in shares (178 million of them). In addition, employees of WhatsApp received a cumulative 49 million RSUs, vesting over the next 4 years. Acquisitions are nothing new, but there was a certain buzz around the periphery of this deal that seems to be pointing towards a new era of Internet entrepreneurship.
It hasn’t been that long since the dot com boom swept Silicon Valley and the world of stock administration, but it sort of feels like a distant memory with the recession etched even more recently in our minds. Almost as soon as we forgot the “boom” and “bust” of the dot com era, familiar rumblings began again. Late last year, Forbes magazine published an article suggesting that a new era of Internet start ups is upon us. In that article, the author shared data from the Kaufman Index of Entrepreneurial Activity (KIEA) that the entrepreneurial rate in the U.S. is already well above the dot.com bubble of 15 years ago. I’m no Internet expert, but if the WhatsApp deal is any indication, maybe it’s true.
Time will tell whether a new era is upon us. The Wall Street Journal and Dow Jones VentureSource now have a running list called “Billion-Dollar Startup Club“, which seeks to keep track of start ups that are valued $1 billion or more by venture capital firms. Currently at the top of the list is cab-hailing app Uber – with a valuation of $18.2 billion (as of June 2014). Not every M&A deal comes with a billion dollar valuation or price tag, but, as the Wall Street Journal points out, that club is getting less exclusive. And with more growing companies moving into the Billion-Dollar Startup Club, we’re certainly hearing about deals loaded up with stock compensation – many of which are creating instant paper wealth, and not just for founders. We’ve covered a lot of new ground in stock administration over the past 20 years, and the interesting part is that we just don’t know what lies ahead. If there is a new generation of start ups on the horizon, hopefully that signals a broader reach for stock compensation as companies get creative in sharing their wealth (or potential wealth) with employees.
It’s that time of year again…when a stock plan administrator’s thoughts turn to proxy disclosures and stock plan proposals and ISS makes repeated appearances in the NASPP Blog. I recently blogged about the ISS policy survey and about their new Equity Plan Data Verification Portal. For today’s entry, I have another ISS update: the results of their policy survey. (And I’m not through with the topic of ISS yet–expect another entry when they release their updated policy and probably yet another when they release the burn rate tables for 2015).
Survey Respondents
ISS’s survey was completed by 370 respondents, 28% of which are institutional investors and 69% of which are issuers. Most of the respondents are located in the United States.
Balanced Scorecard
As I mentioned in my earlier blog, ISS has announced that they are moving to a “balanced scorecard” approach to evaluating stock plan proposals. This approach will weigh 1) the cost of the plan along with 2) the plan features and 3) past grant practices. (Since ISS already looks at all of these areas when evaluating a stock plan proposal, it’s not clear to me how this will differ from what they already do, but if they weren’t changing anything, I wouldn’t have anything to blog about, so I guess I can’t complain.)
The survey asked respondents how much weight each of these three factors should carry in ISS’s analysis of the plan. The results are kind of hard to parse, but I think the upshot is that respondents generally thought that plan cost should carry the most weight (in contrast to my informal and highly unscientific survey, where close to half of the respondents thought all three areas should carry equal weight). From the ISS press release:
With respect to how the plan cost category should be weighed in a scorecard, 70 percent of investors indicate weights ranging from 30 to 50 percent, with a 40 percent weighting cited most often. Sixty-two percent of investors suggest weightings from 25 to 35 percent for plan features; and 64 percent indicate weights ranging from 20 to 35 percent for grant practices. Weightings suggested by issuers were also quite dispersed, but generally skewed somewhat higher with respect to cost, and somewhat lower for plan features and grant practices compared to investors.
Factors Important in Markets with Poor Disclosures
ISS notes that in some developing/emerging markets, the quality of stock plan disclosures is poor. The survey asked respondents what factors are most important to evaluating plans in these markets. The results exposed an interesting discrepancy of opinion between institutional investors and issuers (at least for developing/emerging markets). Investors placed a lot of importance on the use of performance conditions (76% of investors rated this as “very important”); issuers didn’t place nearly as much importance on this (only 49% of issuers rated performance conditions as “very important”). 10% of issuers rated performance conditions as “not important at all” whereas all investors thought performance conditions were at least somewhat important.
Another fabulous NASPP Conference! Here are a few more scenes from Las Vegas:
For the opening keynote, panelists Jiminy Cricket (aka Don Delves of Towers Watson), Johnny Rocco (aka Mike Kesner of Deloitte), The Silver Bullet (aka Jan Koors of Pearl Meyers), Monte Carla (aka Liz Stoudt of Aon Hewitt/Radford), and Compensation Cowboy (aka Barry Sullivan of Semler Brossy Consulting) fought to be the last surviving compensation consultant. Captain Cashbags (aka Broc Romanek of CompensationStandards.com) moderated the panel.
The Conference had closed to 1800 attendees! The morning keynote was jam packed!
Attendees relax and enjoy a conversation in the UBS exhibit booth.
Karen Moses of Xoom won a GoPro camera for playing the Networking Game in the Conference app. Karen is flanked by Dan Coleman of Radford (appropriately dressed in a tux for his role as raffle emcee) and me. Radford stepped up the raffle drawing process by developing the Monte Carlo Raffletron 2200, which applied the principles of the Monte Carlo simulation to randomly select a raffle winner.
The NASPP hosts an annual luncheon for our Chapter Presidents. In this year’s luncheon, the presidents enjoyed a lively discussion of the challenges involved in leading a chapter.
Sheila Frierson of Computershare catches up with a colleague during a break.
I look forward to seeing everyone in San Diego in 2015! Follow the NASPP on LinkedIn, Twitter, and Facebook for more updates on the Conference.
We’re here in Las Vegas for the 22nd Annual NASPP Conference so, for today’s blog, I have scenes from the Conference.
The opening reception always feels like a reunion (but with people you like, not all the horrible people you went to high school with). I love being back here and seeing all my friends and colleagues that I haven’t seen since the last NASPP Conference.
The Fidelity booth is always looks great and is always very popular with attendees. We are very grateful to Fidelity for their continued support as a platinum level sponsor of the Conference.
In addition to the best speakers in stock and executive compensation and fantastic presentations, the Conference always features some great food, with really yummy desserts.
The Schwab team looks super happy and excited to be here at the NASPP Conference. Schwab is one of our newest platinum level sponsors.
Aon Hewitt/Radford is back with the pig racing. I won a cupcake!
We have a new chapter in Las Vegas! As the host chapter for the Conference, the chapter held a meeting at the start of the Conference. Art Meyers from Choate Hall & Stewart presented on “Hiring and Firing Executive Officers: Equity Compensation Issues.” In this pic, we have chapter officers Nathan O’Connor of Equity Methods and Jill Hayashikawa of Pinnacle Entertainment, with Art and the chapter president, John Brewer of Greenberg Traurig.
For more scenes from the Conference, check out the leaderboard for our app game. I hope everyone is enjoying the Conference and I look forward to seeing you all over the next few days!
