> Assume that you own a business that has an overall value of $100m and generates $10m in annual income, and that you hire me as your manager. Assume also that my compensation is $1m and that rather than pay me with cash, you give me 1 per cent of the business as compensation. While you may maintain the fiction that this is a non-cash expense and that your income is still $10m, you are now entitled to only 99 per cent of that income in perpetuity. In effect, your share of the business is worth less and it will get even smaller over time, if you continue to pay me with equity. But if you are a common stockholder in any company that grants options or restricted stock to its employees, then you are in exactly the same position.
While it's obviously bad for shareholders, it basically dilutes their profits in the future, but if those never come, who cares about that dilution? I think it would affect my opinion of the stock long term, but short term any way they get towards profitability minus stocks is a way that someone actually sees a dividend.
But of course, most people actually looking to buy and sell individual stocks won't really care a ton about the dividends IMO. And it's not like people really use voting rights today on tech stocks even if they are offered. It's always fascinated me that stock games like that really come down to just betting on future performance compared to the opinions of others. It's comically confidence based and nothing else.
So if Uber were to eve somehow reach profitability minus stock compensation, their business itself could actually take advantage, even if the shares of others were diluted in terms of dividends.* So if you're buying and selling stocks individually in the current pattern, Uber hitting that middle zone of technically nonprofitable but adjusted profitable would be a good sign for long term resilience, however that factors into the current confidence equation.
How the stock market hasn't been classified as gambling at this point is wild to me.
*I'm actually not personally clear on if it is a dilution or those specifics, its surprisingly hard info to find online easily. One thing is clear though: the company's cash flow itself is not affected at all.
