More Lies of Stock-Based Compensation
Stock-based compensation (SBC) is a real cost to shareholders that has been historically masked by high revenue growth and inflated valuations in software companies. The article argues that while SBC matters significantly for low-growth companies, overly aggressive cost-cutting and SBC reduction paradoxically threaten long-term value by forcing layoffs and reducing innovation capacity in an AI-driven technology shift.
Metrics in this report
83dollars per share
2021 peak price for public SaaS example
5.90dollars per share
Current price (2026) for public SaaS example
14xratio
Shares required to grant same $250K equity value at $5.90 vs. $83 stock price
50%percent of contractual future revenue
Extreme example of software company valuation compression vs. contractual remaining revenue
100xrevenue multiple
Illustrative scenario where SBC is favorable trade-off; stock trading at 100x revenue when 10x might be justified
1xARR multiple
Illustrative scenario where SBC is expensive; stock trading at 1x ARR creates dilution burden