Myth of the CEO Stock Bonus
Updated: Nov 18, 2021
Summary of FUD claims: Remi and other employees would make $350 million bonus if stock price surpasses $5 billion market cap for 20 days, therefore they are suggested to pump the stock to make this bonus with a fake drug, then somehow run away with the money.
Documented by: Veganhippo/FilaminA
During the six months ended June 30, 2021, the Company achieved 10 Valuation Milestones triggering potential Company obligations to all Plan participants from a minimum of $81.0 million up to a hypothetical maximum of $195.0 million, to be determined by the Compensation Committee. However, no compensation expense has been recorded since no grant date has occurred and no Performance Conditions are considered probable of being met. (taken directly from SEC form 10Q)
Those skeptical of Cassava often reference the bonus program as evidence of a pump and dump scheme. However, that seems very unlikely considering the cash bonus plan requires SAVA to achieve a merger / acquisition, or have enough cash on hand to pay the bonus incentive. At this point in time, neither of those two conditions are being met.
Additionally, SAVA’s share price was ~$8 in December of 2020. Throughout 2021, although SAVA hit an all-time high share price of $146, none of the insiders sold shares in the company. Even though SAVA stock has closed at upwards of a 10x multiplier of its December 2020 high, insiders chose not to sell. That being said, the likelihood of a “pump and dump” scheme is considerably unlikely.
Well I thought this all sounded odd, so I dug into the 10Q to figure out what the actual deal was. It turns out that the bonus for the 5B market cap is NOT 350 or 320M as I have seen quoted in various comments, but is actually 50M, IN AGGREGATE, meaning the CEO gets one third of the 50M pool, and other roles get smaller percentages of the aggregate bonus figure. So the CEO’s actual bonus here is closer to 16.75M, which is a nice chunk of change, but not anywhere near what I would think would be motivation or compelling for a mere P&D scheme. He stands to make far, FAR more off stock or options if the company can reach a higher market cap than 5B. Also note that many CEOs, such as Elon Musk, get far more generous CEO stock compensation plans. This is all normal stuff.
Note that the board must agree that there is adequate money to pay the bonus and right now the money is set aside for the trials. Remi owns approximately 2,000,000 shares and didn't sell a single one as it rose to $146/share. He believed in the company so much he bought shares on the open market the same as a retail investor. If you watch his interviews, you can tell he believes in the science and the company.
Cassava 10Q: https://sec.report/Document/0001069530-21-000045/
To find the incentive plan just search “bonus” and the third result will put you in the correct section
From SAVA 10Q:
Other interesting links: