Tech companies, including oOne of the social media platforms used mainly by employees, employers, businesses, and young professionals, have been using stocks to pay its employees.
LinkedIn has caught the attention of many because of its uncommon way of doling out large amounts of stocks to pay its workers.
NYTimes reported that in 2014, the professional networking company shelled out $319 million in stock or 14 percent of their revenue and used it as payment for its workers. A year later, it paid worth $510 million or 17 percent of revenue.
"As LinkedIn prepares to report its latest quarterly earnings next week, Wall Street is increasingly scrutinizing the number of stock grants that the company pays employees," the NYTimes article states.
On the other hand, Mark May, an Internet analyst at Citigroup, said that LinkedIn's way of paying their employees "provides additional reason to remain cautious" especially after the company projected lower growth and the stock price fell.
However, LinkedIn is not the only one using this process. There are a number of tech companies that are using stock-based compensation. This is unquestionable when the company's standing is good. However, during rockier time in the stock market, it's another story. These days are one of those "rockier times" for them.
That is why investors are beginning to examine this method more closely at the quality of the companies' financial results. "The scrutiny means examining earnings with stock-based compensation expenses included - and certain financial measures, like earnings and margins, invariably look worse when that expense is factored in," the report notes.
Tech companies have been known to be one of the most generous companies worldwide that give shares to employees. As a result of such method of payment, there has been a "heightened investor focus on the level of stock-based compensation among the Internet companies," Mark Mahaney, an analyst at RBC Capital Markets, said.