The Advisors' Blog

– Lynn Jokela

Amid Covid-19 and the related economic turmoil, many companies experienced significant stock price declines – many have since seen decent recoveries.  Earlier this year though, as companies granted equity awards, they undoubtedly used more shares from their stock plans than initially projected.  A recent Equilar blog reviewed additional share requests of Russell 3000 companies from 2018  to 2020. Upon first glance, it didn’t appear that 2020 share requests were more frequent than prior years.  But, when Equilar drilled into the data further, it did see accelerated share requests in April 2020.

Equilar found that, in addition to more frequent share requests, the volume of shares requested also increased.  Similar to the number of share requests, the increase in volume of shares requested becomes more obvious when drilling into 2020 data further.  In terms of the number of shares requested as a percentage of shares outstanding, Equilar found a median of 4% at the end of March, which then rose to 4.3% by mid-April and 5.1% by mid-May.

The blog says that proxy advisors have recommended against companies making share requests that the proxy advisors view as too large.  At the same time, Equilar includes data showing a downward trend in vote support as share requests become larger.  Rather than scrambling come proxy season, as we don’t know when or whether stock prices may dip again, if companies haven’t already done so, it might be worthwhile to schedule more frequent assessments of shares remaining available for grant.