Coinbase CEO Armstrong sold shares the day before SEC lawsuit

According to records from the U.S. Securities and Exchange Commission (SEC) SEC, Coinbase CEO Brian Armstrong sold 29,730 shares of company stock on June 5, the day before the SEC filed a lawsuit. The price of Coinbase's stock plummeted by as much as 20% on the day of the lawsuit. Was Armstrong informed in advance or was it purely luck? Let's use this case to understand how the lucrative compensation system for U.S. executives works!

Average CEO Pay in the US Is 670 Times That of Ordinary Employees

In the United States where capitalism prevails, generous stock incentive schemes are often used to attract and retain top executives such as CEOs. According to a survey in May 2022, the average CEO pay in the US is 670 times that of ordinary employees!

CEO Armstrong's Stock Compensation Plan

In 2020, Coinbase established a performance reward for CEO Brian Armstrong, which includes 10-year stock options to purchase 9,293,911 shares of Class A common stock, equivalent to 3.8% of the issued and outstanding shares. The exercise price of this reward is set at $23.46 per share, which was the fair market value when the plan was established.

As shown in the table below, Armstrong is only eligible for the performance reward if Coinbase's stock price exceeds $200, and the number of shares he receives increases as the stock price rises. However, he only met the target once in 2021, and according to Coinbase's SEC filings, after meeting the goal, the shares will be vested over 48 months on a monthly basis, meaning it would take a total of four years to receive all the shares.

In the following two years, Armstrong only received a base salary of $1 million and compensation for personal security and legal expenses. His total compensation in 2022 was even lower than that of the Chief Operating Officer, Chief Financial Officer, and Chief Product Officer.

There was also an earlier incentive plan with an exercise price of $18.71, totaling 2.75 million shares, which also vests over 48 months on a monthly basis.

However, we have compiled Armstrong's stock selling activities and earnings in the past three months. Since March, he has sold over 130,000 shares, earning $12.73 million based on the selling price of the day, which may not include the cost of his stock options.

According to SEC filings, Brian Armstrong submitted a sales plan on August 26, 2022, to comply with SEC's Rule 10b5-1c, which requires insiders to avoid accusations or lawsuits from the SEC for trading with significant insider information. Given Armstrong's position, the sales plan must have been established or modified at least 90 days prior, making it impossible to foresee so far in advance. From his trading records, Armstrong conducts transactions at least four times per month to mitigate the risk of price fluctuations.

Musk Takes the Lead

Another executive who outshines others in earning and joyfully receiving stocks every year is Tesla CEO Musk. According to our previous data, Musk has already received $1.8 billion in stock compensation over three years. It seems that the compensation of these CEOs in American companies is truly incomparable to that of ordinary individuals.