Amazon shares have fallen 37% in the last year.
The massive drop in the value of Amazon’s stock price will affect employee compensation plans, which are heavily weighted toward stock options, according to The Wall Street Journal.
Amazon’s corporate employees receive a large portion of their annual salaries in restricted stock units. With shares down, compensation is expected to be between 15% – 50% lower than Amazon’s projections, the outlet reported.
“Our compensation model is intended to encourage employees to think like owners, which is why it connects total compensation to the company’s long-term performance,” said an Amazon spokesman in a statement to the WSJ.
“That model comes with some year-to-year upside and risk because the stock price can fluctuate, but historically at Amazon, it’s had a history of working out very well for people who’ve taken a long-term view.”
Amazon has been known to make up for lower base pay than its tech competitors through its employee stock compensation plan, which has typically covered the difference. Amazon’s stock compensation plan can comprise 50% or more of longtime employees’ total income, the WSJ reported.
The company typically forecasts a 15% per year share price appreciation, but with shares now only up 26% over the past five years, stock-based compensation is lagging far behind expectations.
On Thursday, Amazon’s share price closed at 95.82, while some employee compensation packages were created with the expectation that its stock would now be at $170 per share, according to the WSJ.
Human Resources at Amazon has been training managers on delivering the news of significant pay cuts to employees, saying managers should focus on employees taking a long-term view and holding onto shares until the stock recovers, the WSJ reported.
“I know that this is and feels like a really difficult time. We have a very uncertain economy, we just had to say goodbye to 18,000 of our teammates, the market is in a funky spot,” Amazon CEO Andy Jassy said in a company-wide meeting, according to the WSJ.
“The result is compensations are impacted. And that is difficult. All of that is difficult. But I am quite optimistic that we have the chance to emerge from this challenging time in a relatively stronger position than we entered it.”
The tech sector continues to suffer an onslaught of share value decreases. In December, the Financial Times reported that laid-off workers are panic-selling, “flooding secondary markets” with their shares of their former employers.
Tuesday was the worst day of the year thus far for the stock market, according to MarketWatch, as some $720 billion in value was erased across U.S. markets.
Money has started to flow into the Dollar (DXY) and out of Gold and Stocks. The trend of the DXY tells a story. FNGD is a 3x short ETF…when Big Tech stocks fall, FNGD shoots up like a rocket. Some pundits predict a 20-30% drop in stocks during 2023.
Is this the etf you’re referring to – Bank of Montreal MicroSectors FANG Index 3X Inverse Leveraged ETN Exp 8 Jan 2038