After the recent revelations on Insider trading by Coinbase’s former Product Manager, another major bad news hit coinbase shareholders.
Recently, Coinbase resorted to laying off employees amid the market slump, and now it’s in the news for some wrongdoing. According JP Morganthe exchange must adopt other methods as part of its employee compensation plans.
Coinbase Shareholders At High Risk of Dilutions
Wall Street announced that Coinbase shareholders “face the risk of higher share dilution stemming from restricted stock units.”
Restricted stock units (RSU) may be included in employee compensation plans; the same goes for Robinhood shareholders.
As per JP Morgan’s analyst, Kenneth Worthington, “Coinbase’s declining stock price could increase share dilution by 7% annually in coming years”.
To provide incentives to staff while keeping cash compensation expenses lower, both companies issue stock in the form of restricted stock units to their employees.
In this situation, Coinbase can be easily compelled to compensate employees by issuing additional shares, but this could lead to a very high dilution of existing shares. A JP Morgan analyst added that the dilutions could reduce the company’s value by 30% in the next five years. Last month, Goldman Sachs also downgraded Coinbase’s ratings amid a market crunch.
How likely are these developments to impact Coinbase in the long term? Comment your thoughts below.
