Kogan.com Ltd (ASX: KGN) shares are falling lower today after the company announced it has issued 6 million retention options worth $98.4 million to its two top executives. This follows shareholders’ approval of the grant on 20 November. At the time of writing, the Kogan share price has fallen 1.22% to $16.21.
Quick background on these options
The Kogan board had been proposing to grant 3.6 million share options to chief executive, Ruslan Kogan, and 2.4 million share options to his chief financial officer, David Shafer.
The board said the share options are meant to be an incentive for the two executives to stay at the company for the next three years. Options are a type of derivative, giving holders the right but not the obligation to buy the underlying shares at a pre-determined ‘exercise price’.
The compensation was challenged by Australia’s biggest proxy advisers who said the options grants are “overly generous”, and encouraged shareholders to vote down the proposal.
At the company’s annual general meeting (AGM) on 20 November however, shareholders voted in favour of the options grant. According to the AGM release, 56.35% of votes were in favour of granting options to Mr Kogan and 56.3% of votes were in favour of granting options to Mr Shafer.
However, it is worth noting that a total of 43.74% votes were against the remuneration, constituting a sizeable protest vote well above the 25% threshold required to hand a first strike for the board. If it receives a second strike next year, the Kogan board could be voted out of office.
The options were issued at an exercise price of $5.29 per share. The Kogan share price is now more than three times that value, however the deal was originally struck in May when the share price was close to $8.
How has the Kogan share price performed in 2020?
Kogan, like other technology-based retailers, has had a fantastic year after the pandemic shifted more people’s buying habits to online. The Kogan share price started the year at $7.47 before slumping to $3.79 at the height of market panic in March.
On a year-to-date basis, the Kogan share price has gained 117%. The company commands a market capitalisation of $1.7 billion.
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Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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