Zoom is cutting back on its stock-based compensation, according to a recent report by Bloomberg.
The move comes amid growing concerns about stock dilution, which negatively impacts the value of existing shares, and marks on ongoing trend across the industry with Salesforce and Workday carrying out similar measures.
In a memo to employees, Zoom CEO Eric Yuan said that the decision was made because the company had been issuing equity at an unsustainable rate.
Zoom to scale back stock-based compensation
The CEO confirmed: “We grant a significant amount of shares each year that has led to very high dilution. Put simply, we are granting too much equity and must proactively reduce it.”
Rewarding employees with stock and making shares available at a discounted rate has been common practice among tech firms for years, however it has now reached the point where alarm bells are ringing for investors and leaders who are concerned about dilution.
After hitting a $559 peak in late 2020 during the onset of the pandemic, Zoom stock has plummeted. Now at $67.53, prices fell as quickly as they rose with values dipping below $100 in early 2022.
To manage the dilution caused by widespread stock issuance, companies like Zoom, Salesforce and Workday have had to adopt tighter controls on stock-based compensation.
Yuan added: “This issue isn’t 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 biggest pandemic-induced layoff, affecting around 1,300 workers, happened in February 2023. Since then, a series of other redundancies have followed including around 150 workers earlier this year.
The company continues to invest in AI in order to maintain its household name status as a worldwide provider of online collaboration tools.
TechRadar Pro asked Zoom to comment on the stock-based compensation decision. Any update will be posted here.
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