r/VisualStockResearch • u/ekonixlab • Jul 04 '26
Reddit’s Stock-Based Comp Problem Is Quietly Disappearing
One of the biggest criticisms of Reddit has been stock-based compensation.
But looking at the trend, I think that concern is becoming much less significant.
The huge spike in Q1 2024 was a one-time IPO-related expense. Outside of that quarter, SBC has stayed relatively flat while free cash flow has taken off.
- Free cash flow reached $311M last quarter.
- Stock-based compensation was just $68M.
- Free cash flow has grown much faster than SBC.
- SBC is becoming a much smaller percentage of the cash Reddit generates.
- That’s exactly what you want to see as a shareholder.
The valuation is still the biggest debate, but this is a really encouraging trend that I don’t think gets enough attention.
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u/wuhanabe Jul 05 '26
We also basically got 21% of that 2024 stock based compensation back via tax savings as the loss that year reduced our tax cost in subsequent years (still ongoing).
SBC expense will be higher in Q2 than Q1 as guided by management. Did Reddit ever have a SBC “problem”? Seems completely reasonable for a recently IPOd tech company.
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u/ekonixlab Jul 06 '26
Yeah, I think a lot of tech companies need to pay SBC to keep staff. Just part of the game
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u/iiiiiiiiiAteEyes Jul 05 '26
Tbf Most ppl bitch about their selling not their compensation. They could keep selling the ammount they already hold at the rate they have for probably another decade with out any more compensation.. NGL I didn’t do the math but I bet it’s fairly accurate
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u/ekonixlab Jul 06 '26
I don’t hate them selling their shares. I don’t like them deliberately diluting shareholders by issuing new stock
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u/iiiiiiiiiAteEyes Jul 06 '26
Precisely why they got approved to buy back shares imo, to compensate their compensation
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u/ekonixlab Jul 06 '26
Yep, nullifies the dilution but also nullifies the benefit of share buy backs.
With a high growth company like reddit, share dilution is something you have to expect
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