As the US equity market has revalued, so too has equity compensation (stock based compensation in English), which as of today has reached a volume of $330 Bn (+9% year-on-year). Although the technology sector remains the largest issuer of SBC, practically all sectors have increased their use over the past year.
SBC has grown from 8% in the manufacturing sector to 28% in the utilities sector, although information and communication technologies remain the focus, with the highest concentration of compensation. Last year's growth of 25% represented an expense of over $170Bn, which accounts for around 3.9% of the revenues of the respective sectors.
Undoubtedly, the overall picture aligns with real examples of substantial SBC packages in the technology sector, and some news may underestimate their impact.
The wave of IPOs this year in the field of artificial intelligence will further magnify the magnitude of SBC.
In terms of reported EPS, SBC is dilutive to the extent that grants are “in-the-money” and profits are positive. However, for those companies with “out-of-the-money” SBC, these compensations may not be reflected in the diluted share count if considered anti-dilutive, artificially raising EPS.
