![]() I suspect for junior level or lower-paid employees, it might be de-motivating to see the number of stock options received from a potentially significant payroll deduction be only 1 or 2 options per pay period. And with the current stock price, each option costs over $200. Netflix employees (who are paying for the options) don't get fractional options. The notes from below this example are both interesting and relevant. I suspect employees accumulating large amounts of very long term options (that they paid for!) is significant in both aligning interests and motivating employees. The next 8 years being the same price seems like a bargain to me. Black-Scholes isn't reliable in my opinion for very long term options, and the longest available Netflix LEAPs (with less than 2 years of time remaining) trade for almost exactly 20% of face value for at-the-money calls. I think that's an exceptionally good deal, assuming their compensation is higher to account for the options not being free. I've included the slide from their employee benefits site below, but essentially Netflix employees pay 40% of the face value as an option premium for options with an at-the-money strike price and a 10 year expiry. Unlike every other company I've come across, the employees (whose compensation is described as top-of-the-personal-market) actually have to purchase their stock options. NFLX has a very unusual option plan for their employees. A constituency that seemed especially notable to me was Netflix employees, as it makes sense the company would want their share purchase plan to be accessible. A variety of reasons were mentioned at the time, but most of them revolved around making the shares more accessible for investors. In 2015, Netflix shares were approaching $700 when they split last time, they closed at $681.17 pre-split on the day of the announcement. So they could even do a 10 for 1 stock split without needing to increase the number of authorized shares, and I doubt they would do a bigger split than that anyway.Ī potentially more potent clue is the current share price. However, that clue is unlikely to be helpful now, as the number of shares authorized is nearly five billion (see table below), while only about 442 million are outstanding at present. This was necessary to complete the split, as the previous number of authorized shares was insufficient to split the stock, so they needed shareholder permission. The biggest clue last time they split was that they requested an increase in the number of authorized shares outstanding. will split their stock again is to consider the last time they split. In my opinion, the best place to look for clues as to whether Netflix, Inc. ![]() I think it's reasonably likely that a split would be at least a short-term catalyst were they to announce one again. The 7 for 1 split followed a meaningful run up in the shares, and they traded up again on the announcement. Then, they didn't split the stock again until 2015 when they split 7 for 1. The first was only a couple of short years after their 2002 IPO, when they underwent a 2 for 1 stock split in 2004. NFLX has done a stock split before, in fact they've split their stock twice. And that's a self-fulfilling prophesy if the split causes demand for the stock to go up. Finally, they can be a near-term catalyst simply because investors think it's a catalyst. It can also have an effect on liquidity in the option market for a firm, as the lower stock price makes 100 share lots (which is the minimum for options) accessible to more investors. While a stock split doesn't change the inherent value of the underlying firm, some investors look at stock splits as a sign of management confidence in the business. The streaming service Netflix ( NASDAQ: NFLX) is ubiquitous, but investors sometimes have less knowledge about its history of splitting its stock. Photo by GoodLifeStudio/iStock Unreleased via Getty Images
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