1. Tech Companies are Paying their Employees at a Huge Expense to Shareholders

    Tech Companies are Paying their Employees at a Huge Expense to Shareholders

    In the heated fight for employees in the tech world, giving workers equity in the company through stock-based compensation has become commonplace.  It has become especially trendy among software companies such as Salesforce and FireEye. This helps the companies keep labor costs down while giving employees a possibly valuable asset to supplement their income...

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    1. This strategy of high stock-based compensation expense is logical for high-growth companies that need to be careful with their cash balances as they invest since they are either burning cash or only marginally free cash flow positive.
    2. We show later in this report that the average annual share base dilution for high growth software companies is over 4% annually.
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