MichelineSteffan: أنشأ الصفحة ب'
When the Comp Committee approves an RSU grant, the number of shares is typically based on an intended value by a price formula, such as the 20-trading-day average closing price. But when the grant is recorded, the fair market value ("FMV") reflects the closing price that day.

As a result, the intended value set by the compensation team varies from the fair market value recorded.

Should you care?

Most comp leaders would say ye...'

2025-11-28T11:03:35Z

أنشأ الصفحة ب' When the Comp Committee approves an RSU grant, the number of shares is typically based on an intended value by a price formula, such as the 20-trading-day average closing price. But when the grant is recorded, the fair market value ("FMV") reflects the closing price that day. As a result, the intended value set by the compensation team varies from the fair market value recorded. Should you care? Most comp leaders would say ye...'

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When the Comp Committee approves an RSU grant, the number of shares is typically based on an intended value by a price formula, such as the 20-trading-day average closing price. But when the grant is recorded, the fair market value ("FMV") reflects the closing price that day. As a result, the intended value set by the compensation team varies from the fair market value recorded. Should you care? Most comp leaders would say yes - we should stick to intended value because that methodology aligns with how we set targets. But how much does it really vary, and when does it matter? I experimented with analyzing stock data from 10 public companies to find out. And the answer is, as every consultant says, it depends: - SBC expense and RSU budgets - yes, you should care, especially for the annual refresh grants - Employee expectations - yes, if your stock is highly volatile - Market data methodology - no, the variance is de minimis Analysis of 10 companies in 2024 YTD I looked at 10 tech companies in the data security industry to see how big the gap gets: - Cloudflare, Crowdstrike, Datadog, F5, Fortinet, Okta, SentinelOne, Snowflake, Twilio, and ZScaler I picked this group of stocks because they were highly volatile in 2024, maximizing differences between FMV and intended value: Using historical stock price data from NASDAQ, I built an analysis of year-to-date (through November 20th) variance in the 20-day average closing price (Intended) and actual closing price (FMV) for each company, then assumed a grant date on the start of each month. Here are the results: This analysis shows that most of the time the [http://www.yancady.com variance] between FMV and intended value was minimal - 70% of all observations were less than +/-5%. The average variance for all events was -0.76%, and in absolute terms was 4.50%. But in any given month, the [https://www.amlakbanoo.com difference] can get pretty big, like Snowflake at -15.93% in March, or Twilio at 18.66% in November. 7 out of 10 companies had at least one grant date month where the difference was greater than 10%. So does this variance between fair market value and [https://sarrbet.com intended] value matter for comp? Let’s start by looking at everyone’s favorite topic right now: SBC expense. SBC expense and RSU budgets - you should care If your stock has a big swing before you make a large set of grants, like getting your annual refresh grants approved, then FMV versus [https://www.propndealsgoa.com intended] value can cause big headaches. For an illustrative example, take Okta - imagine they granted their refresh grants on March 1, 2024, when the 20-day average closing price was $87.24 and the fair market value price was $108.49. This is a windfall for employees (more on that later), but it’s a problem for the CFO. Let’s say they intended to spend $150 million that day, an average refresh grant of about $25k for their 6,000 [https://indiajameen.ai employees]. Since the FMV was 24% higher, their SBC expense recognized over the total vesting period will reflect closer to $186 million, for a difference of +$36 million. 😱 Notice the stock volatility [https://marakicity.com impacts] your RSU budget and share dilution, too. In this illustrative example, sticking with the 20-day average closing price results in spending 1.72 million shares, whereas the FMV implies [https://astroproperties.com spending] 1.38 million shares, 20% fewer. Philosophical aside: if the gap between a 20[https://hoolioapartments.com -day average] closing price and the FMV is big - which methodology do you think more closely reflects "intended" value? If I’m spending an extra $36 million in [https://thanga.in SBC expense] and an extra 340,000 shares, I hope I’m doing it intentionally… So if you have a big list of grant approvals at your next Comp Committee meeting and your stock price has shot up in the last month, you better have a conversation with your CFO first. Employee expectations - yes, it matters If your stock price suddenly changes, employees can get a big windfall (or haircut) on the day of the grant. For example, if you joined Crowdstrike in August, you might be a little annoyed: the stock dropped 43% over the previous 20 trading days, resulting in a FMV 28.6% lower than the 20-day trading average. Meaning, if you were promised a $100k new hire grant in your offer letter, you got 318 RSUs now worth only $71k. Whether your comp team wants to remediate that unlucky timing is a question of compensation philosophy and talent strategy. But every team should at least be prepared for a surge of complaints from unhappy employees who received a fraction of what they expected, despite the [https://landminder.com language] they signed in their offer letter. Can’t help myself - gotta raise my philosophical aside again: if the gap between 20-day average and FMV results in a 29% haircut for employees that month… which valuation feels more "intended"? Market data [https://dreampropertiespr.com methodology -] not much 🤷 For individual companies and specific grants, FMV versus intended value can vary meaningfully when your stock price is volatile. But in aggregate, it appears de minimis. The average FMV/Intended variance across these 10 companies’ 2024 grant dates is 4.50% in absolute terms, but it washes out to -0.76% taking into account positive and negative swings. That’s a rounding error. Consider the variance compared to the difference in market percentile for a P4 software engineer: - 50th percentile new hire grant is $300k - 75th percentile is $450k - A grant 4.5% higher than the median interpolates to the 52nd percentile 50th versus 52nd percentile is pretty uninteresting. Target vs actual - the real conversation I get why we want to use intended value for stock comp benchmarking: - It reflects target value, paralleling construction with target bonus so we can build up to a target TDC - It reflects policy when we use market data to construct ranges - We’re used to getting our data this way, and it needs to be apples-to-apples But the real conversation about stock comp is the actual value the employee experiences: realized value and current unvested value. Realized value: the vested amount that shows up on your W2 - am I making more money this year than last year? Current unvested value: the value of all unvested shares at today’s price - do I have more unvested stock than what I could get by moving to a competitor? Whether an employee feels valued and whether you’re protected against attrition are the outcomes of your compensation strategy. I think most comp teams give this far too little attention, mostly because it’s historically been hard to analyze.

Intended Value Vs FMV: Should You Care - تاريخ المراجعة