Netflix (Netflix Inc.) as the company for this week’s discussion post. Netflix
was founded in 1997 by American entrepreneurs Reed Hastings and Marc
Randolph (Hosch 2009). Netflix is a media streaming and video rental
company, more recently it got involved in the creation of original
programming.
Netflix is using their stock option contract to “enhance their employee’s
benefits, giving employees the chance to invest in the company on their terms,
and when the price is right for them” (A guide on Netflix's benefits program
2019). Netflix automatically provides free stock options equal to 5% of an
employee’s salary- if the employee is salaried, they also allow employees to
direct a portion of their earnings into investing in additional stock options.
Hourly employees do not receive the automatic free stock options allocated to
them, but they also receive the ability to direct a portion of their earnings into
purchasing stock options (A guide on Netflix's benefits program 2019). They
provide these “options” to employees to buy stocks at a price lower than the
current market price (if applicable). The stock options that Netflix issues are
10-year options, they are fully vested when issued, and they can be kept even if
the employee leaves the company (Work Life Philosophy 2022)
The aggregate intrinsic value of the company’s outstanding stock
options as of September 30, 2022, was $1,329 million (Edgar: Company
filings 2022). This represents the difference between the company’s closing
stock price and the exercise price, multiplied by the number of in-the-money
options outstanding.
The aggregate intrinsic value of the company’s outstanding stock
options as of December 31, 2021, was $6744 million (Edgar: Company filings
2022).
I have included the value based on quarterly statements and annual
statements, as annual statements were requested for this prompt, but the
quarterly statements do give more current up to date information (annual
reports for 2022 are not out yet). Also, it shows how much can change over the
course of a year for a company.
(Information based on the quarter ended 09/30/22)
(Information based on the fiscal year ended 12/31/21)
a If I were issued stock as part of my pension package benefit, I would
have some decisions to make to earn extra money above the dividends. First
and foremost, I think that it would be a good idea to hold on to a good portion
of the stock that was issued as part of the pension package. While Netflix stock
had a “bad” year in 2022, its stock has seen massive growth in the past decade.
It is also expected to continue to see growth in the coming years, as it gets back
on track from 2022. Despite their trouble in 2022, Netflix has established that
it can generate sustainable profits (Sismanis, 2022). As the stock price grows
you will continue to increase your own value, and you can sell off if needed, or
if the stock begins to head in the wrong direction.
a Before retirement the number one financial goal is to grow your portfolio
to ensure you have enough money for retirement. Once you hit retirement,
those priorities do change slightly. While it is still important to grow your
portfolio to generate income for you, it is also important to mitigate risks with
your investment. Higher risk is okay when you are still working, as you have
time to recover from any economic downturn. When you hit retirement, it is
more important to have a diversified portfolio that is lower in risk. Because of
this it would be wise to sell off a portion of the stock received at a reasonable
price, and invest it in more stable, less risky investments, such as money
markets, bonds, or CD’s (Anderson, 2022). These lower risk investments will
provide you with less income, so you would want to keep some of the riskier
stocks etc. to provide more income, plus you will be able to hang on to the
dividend income. By selling off some of the stock, and using proceeds from
that plus your dividend income, to invest in lower risk lower reward
investments, (Government bonds, CD’s, money markets, notes etc.) you can
provide yourself with additional income, all while lowering the overall risk of
your portfolio.
a Since the best way to earn more money above dividends, is to invest those
dividends, you would also want to do that. Looking for higher dividend stocks
can help increase your yield. You may also want to invest in mutual funds, and
they can search out high dividend stocks for you. By reinvesting dividends,
you can make more dividends from your dividends (Anderson 2022). The
more shares of a stock you hold, the more dividends your will receive. If the
stock you got with your pension benefits isn't doing well, you may choose to
sell it all off, and reinvest it in a stock with higher earnings, or higher dividend
yield.
References
Anderson, S. (2022, December 19). Determining risk and the risk pyramid.
Investopedia. Retrieved January 5, 2023, from
https://www.investopedia.com/articles/basics/03/050203.asp
Edgar: Company filings. U.S. Securities and Exchange Commission . (2022,
July 22). Retrieved January 5, 2023, from
https://www.sec.gov/edgar/searchedgar/companysearch
A guide on Netflix's benefits program. MYRA. (2019, October 18). Retrieved
January 5, 2023, from https://blog.myrawealth.com/insights/a-guide-on-
netflixs-benefits-program
Hosch, W. (2009, April 23). Netflix. Encyclopædia Britannica. Retrieved
January 5, 2023, from https://www.britannica.com/topic/Netflix-Inc
Sismanis, N. (2022, December 19). Is Netflix stock (NASDAQ:NFLX) A buy
75% off its low? TipRanks Financial. Retrieved January 5, 2023, from
https://www.tipranks.com/news/article/is-netflix-stock-nasdaqnflx-a-
buy-75-off-its-low
Work Life Philosophy. Netflix jobs. (2022). Retrieved January 5, 2023, from
https://jobs.netflix.com/work-life-philosophy
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