Stock-based compensation can significantly affect a company's financial health, especially when it constitutes a large percentage of revenue. When share prices plummet, companies often issue more options, leading to dilution of earnings for shareholders. This dynamic creates a challenging environment for stock prices, particularly for companies like Robinhood, where compensation costs are alarmingly high compared to revenue. Ultimately, when stock-based compensation reaches unsustainable levels, shareholders face serious risks in the short to medium term.
