The Information reports Netflix’s share price decline last week wiped out the value of all stock options issued to Netflix employees since 2018. Staff pressed management on issuing additional grants to offset losses in a meeting last week. Netflix allows employees to decide their own compensation mix of stock and cash. #netflix #tech
Stocks go up, stocks go down. How is this a surprise?
This is why I never consider stock to be part of my TC. Stock isn’t guaranteed. It’s a bonus. A cherry on top.
TBH Netflix paid a bulk of their comp in cash. So I'd imagine most employees are doing alright
It was guaranteed cash comp at Netflix. They had the option to buy options. I think it's 10 years, and the premium is about 45%. This means the stock has to go up by a whole bunch just to break even. They decided to gamble without any fundamentals at stake, and they lost. Cry me a River!
The Netflix stock options had to have the stock to 1.4x or 2x before you'd get a break even. If it never moves, you lose 100% of the investment. If it moves only 40%, you could still get the whole thing as 0. It's funny how everyone was okay with the upside, but suddenly downside of the whole thing going to straight 0 is too much to handle! Moreover, they're 10-year options; would they give the money away if magically the stock rebounds 3x in year 9, in a single year just before expiration? I lost money at my broker, can I ask an options refund, too? Before the contract even expires? And then get the full upside of the contact if the stock goes up?
When my options got wiped out I took that on the chin and never asked to be made whole again. Option means it is your job to work hard to push stock price higher. If you succeed you get a share of that success, if you fail then you don’t.
Did they already expire? Aren't they valid for 10 years?
No they expired worthless, long time ago in 2000 crash
Most companies give RSUs options suck
The way Netflix structured the options was insanely risky. I’m surprised any mature company would offer their employees something so risky and hard to value. It worked out great for some early employees who took the risk, so lots of later employees did it because of fomo.
??? They’re 10 year options. Options are traded all the time in the equities market. The difference is those are 2 year options. Netflix gave employees 10 year options (if they chose to buy them). The entire market is a gamble. Always has been.
Risk/Reward ratio
I do think some people are in for a rough time before too long 10Y is far too long of a period. It creates very negative dynamic and morale if people miss the option
“Staff pressed management” is a weird way to say “one person asked a question to understand if this is something the company would consider.”
Does Netflix not give employees RSUs?
no
No. They pay in all cash. A lot of it. If you look at levels.fyi you can see the average engineer is around $550k. That’s $21k every two weeks (minus taxes in your bank account. If you want to buy options you can or you can choose the entire amount in cash. It’s up to you. The Netflix stock drop has had 0 impact on anyone that chose not to buy options.
I did not know about the cash and stock mix for comp, but that’s an innovative way to create a comp plan
We do (did?) a similar thing, where a candidate who passed interviews would get 3 offers, each with a different mix of salary/ISOs
Startups frequently do this vs. doing one size fits all. For example a 34 y/o PhD with a family may want the cash today vs. a 22 y/o ready to risk it all