Warner Music Group executives shared an incentive plan jackpot worth $593m in stock following the firm’s IPO on the Nasdaq in June, MBW can reveal.
The figure was the ultimate result of a years-long compensation plan that saw some of the firm’s leading executives participate in the upside of a successful public flotation.
According to a Warner SEC filing that emerged today (October 19), the $593m – correct as of June 30 this year – was comprised of a “one-time non-cash stock-based compensation” related to WMG’s long-term incentive plan.
That incentive plan, dating back eight years, has given some longstanding members of the senior management team at Warner the opportunity to defer their annual bonuses and instead receive grants of equity interests in the company.
Those bonuses are usually based on the company’s free cash flow performance each fiscal year.
The exact amount the individual executives will receive in cash from the shared $593m stock compensation will obviously depend on the moment they sell and/or are permitted to sell their shares, and the price of the shares at that juncture.
An important piece of context: the incentive plan was launched in 2012, back when the record industry was still in piracy-hit freefall, with a then loss-making Warner coming off more than a decade of annual declines.
The execs who joined the plan at this time were therefore taking a sizable risk with their own compensation.
Essentially, they bet on the future of Warner Music Group and the wider record industry, while doubling down on their own chances of turning things around.
Eight years on, that bet paid off, like few could have predicted.
Before Warner went public, there were three shareholders in its company. All three were controlled by Access Industries and Len Blavatnik, with one, WMG Management Holdings, LLC, also acting as a vehicle for the executive incentive plan.
According to Warner’s S-1 document announcing its IPO intentions back in February: “Following the offering, all deferred equity units and vested Profits Interests and Acquired LLC Units will be settled in or redeemed with shares of our Class A common stock. Furthermore, shares of Class A common stock received in settlement of deferred equity units will no longer be required to be immediately exchanged for equity units in Management LLC.”
Warner Music Group floated on the Nasdaq on June 3, following a delay to its IPO caused by uncertainty over the Coronavirus pandemic.
The firm’s share price currently sits at $29.26, giving the company a $14.96bn market cap, according to Google Finance.Music Business Worldwide