Cash or Stock? Amazon Pilots New Choice for Employee Compensation in 2024
Some Amazon employees who receive RSUs as part of their compensation package will be able to participate in a pilot program. This program will allow you to reduce the amount of stock you receive in exchange for more cash.
Who is Eligible?
If you are L4 – L8 and will receive at least 16 RSUs that will vest in 2025 – you can participate.
Enrollment Window
The decision must be made between May 3rd – May 17th, 2024.
Reduce RSUs in Exchange for Cash
During the enrollment window you have the following options to make:
Option 1: Do not participate in the pilot and receive 100% of your RSUs, as planned.
Option 2: Receive 25% of your vesting RSUs as cash (at Amazon’s preset planning price of $173.12) and your remaining 75% as RSUs.
If you decide to receive 25% of these RSUs in cash, that cash will be paid quarterly beginning in May 2025.
The program is optional. If you don’t want to participate there is nothing you need to do. The default setting will remain unchanged, and you will receive 100% of your planned RSUs for 2025.
Understanding Your Amazon RSU Cash Option
Cash vs Amazon RSUs?
In this video, we walk through an example to show the potential impact of your decision.
Your decision this May will be for shares that are vesting 12-21 months down the road between May 2025 and February 2026.
This video is for illustrative purposes only
An Example of the New Amazon RSU / Cash Option
In this example you are going to receive 100 Amazon RSUs that will begin to vest in May 2025.
With this new pilot program, your choices for these RSUs are:
- Option one – receive 100% of your RSUs.
- Option two – receive 25% of your RSUs as cash, at the predetermined planning price of $173.12.
If you choose option one, you will receive your RSUs at Amazon’s future stock price on the date of each vest.
If we had a crystal ball and knew that Amazon’s stock price was going to be above the planning price of $173.12 when your RSUs vest, your decision would be relatively easy, just take all the RSUs.
We know that this decision requires much more thought and planning, especially since the unknown is Amazon’s future stock price.
If you choose option two, you will receive 25% (25 shares) of those RSUs in the form of cash at a predetermined price. Amazon calls this the planning price and it has been set to $173.12.
You will receive 75 RSUs vesting at whatever the future Amazon stock price might be 12 to 21 months down the road, plus (in this scenario), $4,328 in cash compensation (25 shares x $173.12).
Weighing Your Equity Comp Decision
Choosing 100% RSUs probably means you are more comfortable with a larger concentration of Amazon stock.
This option would end up being the most optimal decision if Amazon’s stock price increases.
However, individual company stock prices tend to be volatile, and Amazon is certainly no exception. If you go with the 100% RSU option, your portfolio is more susceptible to the inherent risk that comes with owning any individual stock.
The Hybrid Approach: Mixing Amazon RSUs and Cash
Why might you opt for a mix of 75% RSUs and 25% cash?
This choice is about balance. By taking some compensation in cash, you reduce your exposure to Amazon’s stock performance, which can be particularly comforting if:
- You already own a considerable amount of Amazon stock.
- You and your spouse or partner both work at Amazon, which could multiply your financial risk during downturns.
- You’re comfortable giving up some upside opportunity for a little more downside protection.
Choosing to diversify your compensation by incorporating some cash alongside RSUs can protect against unforeseen circumstances, like layoffs or a declining stock price (the two of which are often correlated).
Planning for Your Financial Future
Deciding how to receive your compensation at Amazon isn’t just a matter of personal preference; it’s an important part of your overall financial strategy. Balancing risk and potential reward, considering your existing assets, and planning for you and your family’s future are all integral to your long-term plan.
Navigating Your Amazon Compensation
Your compensation choices at Amazon are significant decisions that should align with your long-term financial goals.
During this enrollment period in May, whether you opt to receive 100% of your RSUs or a mix of RSUs and cash, understanding the implications of each option will empower you to make choices that foster both financial stability and growth.
The content shared is for illustrative purposes only. Individual situations may vary.
Please consult your advisor to determine if the scenarios discussed on this page are right for you.
Investment Advisory services offered through Avier Wealth Advisors.