From 7625fdf191f36b95f4bfdce6310422e77e2a0bf7 Mon Sep 17 00:00:00 2001 From: Liza Jessop Date: Fri, 29 Aug 2025 16:51:22 +0000 Subject: [PATCH] Add Intended Value Vs FMV: should you Care? --- ...nded-Value-Vs-FMV%3A-should-you-Care%3F.md | 58 +++++++++++++++++++ 1 file changed, 58 insertions(+) create mode 100644 Intended-Value-Vs-FMV%3A-should-you-Care%3F.md diff --git a/Intended-Value-Vs-FMV%3A-should-you-Care%3F.md b/Intended-Value-Vs-FMV%3A-should-you-Care%3F.md new file mode 100644 index 0000000..93ddd1f --- /dev/null +++ b/Intended-Value-Vs-FMV%3A-should-you-Care%3F.md @@ -0,0 +1,58 @@ +[60millions-mag.com](https://www.60millions-mag.com/forum/amazon-f143/amazon-censure-les-avis-negative-t65785.html)
When the Comp Committee approves an RSU grant, the number of shares is typically based on an intended value [divided](https://dcs-group.fr) by a price formula, such as the 20-trading-day average closing price. But when the grant is recorded, the fair market value ("FMV") reflects the closing price that day.
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As a result, the intended value set by the compensation team varies from the fair market value recorded.
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Should you care?
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Most comp leaders would say yes - we should stick to intended value because that methodology aligns with how we set targets.
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But how much does it really vary, and when does it matter?
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I experimented with analyzing stock data from 10 public companies to find out. And the answer is, as every consultant says, it depends:
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- SBC expense and RSU budgets - yes, you should care, especially for the annual refresh grants +
- Employee expectations - yes, if your stock is highly volatile +
- Market data methodology - no, the [variance](https://soft.estate) is de minimis +

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Analysis of 10 companies in 2024 YTD
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I looked at 10 tech companies in the data security industry to see how big the gap gets:
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- Cloudflare, Crowdstrike, Datadog, F5, Fortinet, Okta, SentinelOne, Snowflake, Twilio, and ZScaler +
+I picked this group of stocks because they were highly volatile in 2024, maximizing differences between FMV and intended value:
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Using historical stock price data from NASDAQ, I built an analysis of year-to-date (through November 20th) variance in the 20-day average closing price (Intended) and actual closing price (FMV) for each company, then assumed a grant date on the start of each month.
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Here are the results:
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This analysis shows that most of the time the variance between FMV and intended value was minimal - 70% of all were less than +/-5%.
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The average variance for all events was -0.76%, and in [absolute terms](https://khresearchandanalytics.com) was 4.50%.
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But in any given month, the difference can get pretty big, like Snowflake at -15.93% in March, or Twilio at 18.66% in November. 7 out of 10 companies had at least one grant date month where the difference was greater than 10%.
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So does this variance between fair market value and [intended](https://housingbuddy.in) value matter for comp?
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Let’s start by looking at everyone’s favorite topic right now: SBC expense.
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SBC expense and RSU budgets - you should care
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If your stock has a big swing before you make a large set of grants, like getting your [annual refresh](https://kate.com.qa) grants approved, then FMV versus intended value can cause big headaches.
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For an illustrative example, take Okta - imagine they granted their refresh grants on March 1, 2024, when the 20-day average closing price was $87.24 and the fair market value price was $108.49.
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This is a windfall for employees (more on that later), but it’s a problem for the CFO.
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Let’s say they intended to spend $150 million that day, an average refresh grant of about $25k for their 6,000 employees. Since the FMV was 24% higher, their SBC expense recognized over the total vesting period will reflect closer to $186 million, for a [difference](https://crosscheck.in) of +$36 million. 😱
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Notice the stock volatility impacts your RSU budget and share dilution, too. In this illustrative example, sticking with the 20-day average closing price results in spending 1.72 million shares, whereas the FMV implies spending 1.38 million shares, 20% fewer.
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Philosophical aside: if the gap between a 20-day average closing price and the FMV is big - which methodology do you think more closely reflects "intended" value?
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If I’m spending an extra $36 million in [SBC expense](https://dentalbrokerflorida.com) and an extra 340,000 shares, I hope I’m doing it intentionally…
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So if you have a big list of grant approvals at your next Comp Committee meeting and your stock price has shot up in the last month, you better have a conversation with your CFO first.
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[Employee expectations](https://aikyathadevelopers.com) - yes, it matters
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If your stock price suddenly changes, employees can get a big windfall (or haircut) on the day of the grant.
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For example, if you joined Crowdstrike in August, you might be a little annoyed: the stock dropped 43% over the previous 20 trading days, resulting in a FMV 28.6% lower than the 20-day trading average. Meaning, if you were [promised](https://offplanluxury.com) a $100k new [hire grant](https://www.plintharea.com) in your offer letter, you got 318 RSUs now worth only $71k.
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Whether your comp team wants to remediate that unlucky timing is a question of compensation philosophy and talent strategy. But every team should at least be prepared for a surge of complaints from unhappy employees who received a fraction of what they expected, despite the language they signed in their offer letter.
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Can’t help myself - gotta raise my philosophical aside again: if the gap between 20-day average and FMV results in a 29% haircut for employees that month… which valuation feels more "intended"?
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Market data methodology - not much 🤷
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For individual companies and specific grants, FMV versus intended value can vary meaningfully when your stock price is volatile.
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But in aggregate, it appears de minimis.
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The average FMV/Intended variance across these 10 companies’ 2024 grant dates is 4.50% in absolute terms, but it washes out to -0.76% taking into account positive and negative swings.
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That’s a rounding error.
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Consider the variance compared to the difference in market percentile for a P4 software engineer:
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- 50th percentile new [hire grant](https://patriciogarciapropiedades.com) is $300k +
- 75th percentile is $450k +
- A grant 4.5% higher than the median interpolates to the 52nd percentile +
+50th versus 52nd percentile is pretty uninteresting.
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Target vs actual - the real conversation
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I get why we want to use intended value for stock comp benchmarking:
[condosdeal.com](http://www.condosdeal.com/) +
- It reflects target value, [paralleling construction](https://elxr.ae) with target bonus so we can build up to a target TDC +
- It reflects policy when we use market data to construct ranges +
- We’re used to getting our data this way, and it needs to be apples-to-apples +
+But the [real conversation](https://www.safeproperties.com.tr) about stock comp is the actual value the employee experiences: realized value and current unvested value.
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Realized value: the vested amount that shows up on your W2 - am I making more money this year than last year? +
Current unvested value: the value of all [unvested shares](https://reshine.ai) at today’s price - do I have more unvested stock than what I could get by moving to a competitor? +
+Whether an employee feels valued and whether you’re protected against attrition are the outcomes of your compensation strategy. I think most comp teams give this far too little attention, mostly because it’s historically been hard to analyze.
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