The drop in the profits of home carbonated beverage manufacturer SodaStream International Ltd. (Nasdaq: SODA) and the dive taken by the company share price, which has fallen 41% in five months, mean that the conditions for exercising some of the option allocated to CEO Daniel Birnbaum have not been fulfilled. SodaStream is now trying to change this situation. At the upcoming shareholders meeting, the shareholders will be asked to approve a new allocation of options at a reduced exercise price.
SodaStream wants to allocate 600,000 options to Birnbaum, 190,000 of which are to replace 190,000 previous options allocated to him that included a condition relating to earnings before interest, taxes, depreciation, and amortization (EBITDA), and some of which carried an exercise price of $35, 2.5 times the current share price.
The current market cap of SodaStream, which manufactures and markets home carbonated beverage machines, is less than $300 million, 82% less than the company's 2011 peak. The company said that in the current situation, the remuneration for Birnbaum does not constitute a proper incentive for long-term performance. They also mention his talent and education, and the role he played in the company's growth.
The new options will be vested in three stages: one third will be vested immediately at an exercise price of $15.50 (compared with the current market price of $14.10); one third after one year, unless the share price reaches $22 before then, in which case they will be vested immediately; and one third after two years, unless the share price reaches $27 before then, in which case they will be vested immediately. The company is also seeking to approve a special grant of 200,000 more options for Birnbaum if a "strategic investment" in SodaStream of at least $25 million is obtained.
"He simply doesn't deserve it"
"SodaStream is in a mess. Its strategy was not carried out, the share price plunged, profits have fallen dramatically, and there's one person who controls the company: Birnbaum," a capital market source told "Globes" today. "The share price didn't fall for no reason; the reason was the CEO's failure, and now the company wants to give him a new series of options, after the options he already has amount to almost 6% of the company. I don't understand the logic: he was unsuccessful, he gets a very handsome salary, and they're allocating him more options. Sometimes, a given company can have a good performance, but the capital market is bad and the share price goes down. In a situation like this, the CEO could deserve a bonus, because it's not his fault. Here, there's one person who controls the company, and there's a failure - profits have fallen dramatically, not just the share price. He simply doesn't deserve it, because he didn't do good work."
The source also commented on the vesting mechanism for the options, which included a rise in the share price as a condition, saying, "It's not so relevant, because judging by what the company did yesterday, even if the share price goes down to $5, it can give the CEO a new allocation." SodaStream did not respond to the report.
Published by Globes [online], Israel business news - www.globes-online.com - on November 18, 2015
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