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)
d d 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.
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.
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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