Zoom is cutting its stock-based compensation, according to a recent report from Bloomberg.
The move comes amid growing concerns about share dilution negatively impacting the value of existing shares. It’s a trend that’s continuing across the sector, with Salesforce and Workday taking similar steps.
In a memo to employees, Zoom CEO Eric Yuan said the decision was made because the company had been issuing shares at an unsustainable rate.
Zoom to reduce stock-related compensation
The CEO confirmed: “We are granting a significant number of shares each year, which has resulted in very high dilution. Simply put, we are granting too much equity and need to proactively reduce this.”
Rewarding employees with stock and making shares available at a discounted rate has been common practice at tech companies for years. But now it’s gotten to the point where investors and executives are starting to raise alarm bells, worried about dilution.
After peaking at $559 in late 2020 at the start of the pandemic, Zoom’s stock has plummeted. Now at $67.53, prices have fallen as quickly as they rose, with values dipping below $100 by early 2022.
To control the dilution resulting from large-scale share issuance, companies like Zoom, Salesforce and Workday had to implement stricter controls on stock options.
Yuan added: “This issue is not unique to Zoom; our peer group is facing similar challenges.”
More broadly, Zoom has struggled with the tough economic conditions that followed the pandemic. The company’s largest pandemic-related layoffs, affecting about 1,300 workers, occurred in February 2023. A series of layoffs have followed since then, including about 150 workers earlier this year.
The company continues to invest in AI to maintain its status as a global provider of online collaboration tools.
Ny Breaking Zoom asked for comment on the stock compensation decision. Any updates will be posted here.