Fact
Incentive-caused bias: share buybacks line the CEO's own jeans
Wilkinson explains incentive-caused bias using buybacks: CEOs paid in stock options benefit when share price rises, and buybacks shrink the share count to lift price — so a 'return capital to shareholders' move can really be self-enrichment.
“a lot of CEOs are compensated based on share price because they get stock options. So their stock options become more valuable when the share price goes up. And what makes the share price go up but share buybacks? So when you buy back shares, there's fewer shares and each individual share is worth more. So it's actually a way for the CEO to put money in his or her own jeans.”
Fact
Incentive-caused bias: share buybacks line the CEO's own jeans
Wilkinson explains incentive-caused bias using buybacks: CEOs paid in stock options benefit when share price rises, and buybacks shrink the share count to lift price — so a 'return capital to shareholders' move can really be self-enrichment.
“a lot of CEOs are compensated based on share price because they get stock options. So their stock options become more valuable when the share price goes up. And what makes the share price go up but share buybacks? So when you buy back shares, there's fewer shares and each individual share is worth more. So it's actually a way for the CEO to put money in his or her own jeans.”
Number
MetaLab threw off ~$7M/year in profit before Tiny started buying
Wilkinson reveals MetaLab was generating roughly $7 million a year in profit when he began acquiring other companies, starting with Designer News in 2013. That free cash flow became the engine for Tiny's acquisitions.
$7M
MetaLab annual profit when Tiny began acquiring · USD/year
“I think we were doing about $7 million a year in profit or something like that when we started buying businesses.”
Number
MetaLab hit $7M in profit by year 7
Sam reads from a public article that by Andrew Wilkinson's seventh year in business, his company (around MetaLab) had reached $7 million in profit before he hired a formal CEO.
$7M
Annual profit by year 7 · USD
“by your 7th year of business, you had $7 million in profit according to this article on like colinkeely.com. So you had a good-sized business.”