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by bryanlarsen 24 days ago
Facebook doesn't get the money when you buy a share of META -- that goes to the person you bought the share from. They could do an offering to raise money, but they aren't. They've been doing the opposite, they've been buying back shares at a significant rate. Some of it is to offset stock based compensation, and some of it is just stock pumping.
2 comments
Galanwe 24 days ago
> Facebook doesn't get the money when you buy a share of META

Technically no, but in reality yes, because shares are used as currency.

For instance, META does not acquire companies using cash, they use their own shares as payment. The higher the stock price, the lower the dilution.

Same thing for stock options and RSU.

So, it's true that stock prices don't translate 1:1 to cash inflows, but wherever stocks are currency (employee compensation, benefits, acquisitions, etc), it does translate.

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nickff 24 days ago
The high share prices do subsidize Meta's share-based compensation, which seems to make up a substantial portion of the total wage bill. High and rising share prices also allow Meta to purchase other companies with Meta shares, instead of having to pay cash, which is beneficial in many ways.
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bryanlarsen 24 days ago
That's an illusion. They book the expense at the cost of the share on grant date, so it looks good on the P&L, but they have to purchase the share at the price on the exercise date, so it's a significant drain on free cash flow.

Given that the thesis of the original post is that companies are swimming in money due to high stock prices; significant drains on free cash flows probably aren't the cause.

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Galanwe 24 days ago
Absolutely not.

For RSUs companies do not purchase at exercise date, they issue new shares (or use previous buybacks).

And for stock options, the employee pays the strike, so it's even a positive cash flow.

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barchar 24 days ago
This is only sorta true, the total dilution from SBC is very small for most tech companies with some outliers (cough snap cough).

They may not purchase on exactly the vesting date but they certainly do offset the issued shares with buybacks. I think they can choose to reduce those buybacks without as much rigamarole as they'd need to issue new shares for funding, so they can effectively used that as a "back door" way to raise money. I think it might juice their P&L a little too, but I doubt that's why they do it.

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bryanlarsen 24 days ago
In the past Facebook bought back enough shares to cover RSU's. Their AI spend has changed this.
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