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If Only The Guardian Understood Anything At All About Money

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Wouldn’t it be a lovely world if those who wrote – and edited – The Guardian had even a basic understanding of this capitalist free marketry that they so rail against?

Like, for example, the difference between a stock option and a stock grant?

The online furniture retailer Made is giving share options worth more than £10,000 to all its staff after the company benefited from new shopping habits forged during the lockdown.

Coronavirus restrictions, coupled with the shift to working from home, proved the catalyst for a boom in home furnishings sales, with consumer cash usually spent on foreign holidays and socialising funnelled instead into interior makeovers, sofas and desks.

The way that’s written that’s an absolutely horrible deal for the staff. Yet the G seems to think it’s lovely.

Sales had been “extremely strong” in 2020, said Philippe Chainieux, Made’s chief executive, and the decision to give shares to its 650 staff was an acknowledgement that it would not have been possible without them.

That’s great, that’s absolutely lovely though.

The difference is that a share option is the right to purchase shares at some price fixed today but at some date in the future. It is almost always true that the price fixed today is today’s price. This is more formalised in the American system – tax laws etc make it so – but it’s usual in the UK as well. Our shares are worth £1 today, so, to incentivise you we’ll let you buy shares in, say, three year’s time at that £1 price of today.

Given that the business is going gangbusters you’ll make out fine.

But note what happens here. You want that price to be fixed at a low point in the business’ fortunes. What you really don’t want is the price to be fixed coming off the boom of a one time and once only event like the pandemic. Setting the options price just after a 170% boost in sales just isn’t what you, as the option grantee, want.

All Made staff, barring senior management, are receiving the same number of share options, which vest in equal tranches over the next three years. They are estimated to be worth the equivalent of six months’ salary.

Given that options are granted at current stock prices they have no intrinsic – although they do have a time and we can get more complicated with Black Scholes and all that – value at all.

What’s actually happening is that the staff are being offered share grants. Here are some shares. For freebie. At the moment you only nominally own them. But next year one third of them really become yours to own. Even sell if there’s a market you can sell them in. And the year after another third become really yours etc.

D’ye see the difference? An options is the ability to buy at today’s price. A grant is here’s the stuff itself.

Wouldn’t it be wonderful if those who wrote The Guardian grasped these basic points about the system they so despise?

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