In the AAPL chart, the SBC cost is much less than the stock buyback Apple completed that quarter. While SBC are commonly FUTURE shares so it's less of, well, an apples to apples comparison, does a buyback rate exceeding the SBC issuance rate tend to nullify dilution risks? Or is a buyback not a sufficiently precise opposite to issuance to make that comparison?
Does there exist a better opposite to issuance than a buyback?
Great question! While buybacks and SBC issuance are not precise opposites, a buyback rate exceeding the SBC issuance rate can indeed help mitigate dilution risks. When a company repurchases its shares, it reduces the number of shares outstanding, which can offset the dilution caused by issuing new shares through SBC.
Buybacks and SBC issuance are not the only factors affecting the total number of shares outstanding. Other factors, such as mergers and acquisitions, capital raises, and convertible securities, can also influence the share count.
Of course, Apple has been a "cannibal," buying back AAPL shares aggressively, so they don't have a dilution issue. That's why it's critical to take a holistic view.
This example further reinforces the argument that SBC has a cost. If buybacks and SBC were 1:1, you might not directly observe the dilution but the cash paid for buybacks can be thought of as the additional compensation to employees.
A well articulated article explaining the SBC concept. In general, SBC is a good compensation tool for retaining talents but as you pointed out, investors should treat it with caution.
In the AAPL chart, the SBC cost is much less than the stock buyback Apple completed that quarter. While SBC are commonly FUTURE shares so it's less of, well, an apples to apples comparison, does a buyback rate exceeding the SBC issuance rate tend to nullify dilution risks? Or is a buyback not a sufficiently precise opposite to issuance to make that comparison?
Does there exist a better opposite to issuance than a buyback?
Great question! While buybacks and SBC issuance are not precise opposites, a buyback rate exceeding the SBC issuance rate can indeed help mitigate dilution risks. When a company repurchases its shares, it reduces the number of shares outstanding, which can offset the dilution caused by issuing new shares through SBC.
Buybacks and SBC issuance are not the only factors affecting the total number of shares outstanding. Other factors, such as mergers and acquisitions, capital raises, and convertible securities, can also influence the share count.
Of course, Apple has been a "cannibal," buying back AAPL shares aggressively, so they don't have a dilution issue. That's why it's critical to take a holistic view.
This example further reinforces the argument that SBC has a cost. If buybacks and SBC were 1:1, you might not directly observe the dilution but the cash paid for buybacks can be thought of as the additional compensation to employees.
A well articulated article explaining the SBC concept. In general, SBC is a good compensation tool for retaining talents but as you pointed out, investors should treat it with caution.