Spring Load?

NYSE: PINS

I don’t trade based on short-term moves in stock prices, but I came across an interesting disclosure from Pinterest that might be of interest to some event-driven readers. Pinterest earnings are scheduled for tomorrow after market close (February 6th), which makes this quite timely.

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On January 6th, 2025, Pinterest’s CEO received 572,884 PSUs to “incentivize shareholder value creation”. At target, these are worth $18MM, but the payout ranges from 0-200% of target. The PSUs vest based on relative TSR versus the Nasdaq CTA Internet Index measured over a three-year performance period from January 1, 2025, through December 31, 2027, in addition to remaining employed throughout that period.

The timing of the grant is quite peculiar:

• Dec 31, 2024 – Pinterest’s FYE

• Jan 6, 2025 – Pinterest grants its CEO these large PSUs

• Feb 6, 2025 – Pinterest will release their FYE 2024 10-K after market close

The reason this grant stands out to me is:

1. The board would not want to grant relative TSR PSUs if they thought the upcoming FYE results would tank the stock. That would put the CEO’s grants immediately underwater.

2. The PSUs were granted on Jan 6, 2025, and the board/compensation committee could have had insight into Pinterest’s financial results for the Dec 31 ended period.

3. Proper compensation practices would have granted the CEO PSUs once earnings are announced on Feb 6, not before.

4. Pinterest typically grants RSUs and stock options to executives, not PSU’s. Historically, both executives and directors at Pinterest have generally received equity grants in April/May, which follows the AGM. This CEO PSU grant is off-cycle.

5. The company did not disclose the exact details of the PSU in the 8-K, but instead said it would fully-disclose it in the 10-K filed one month later.

While this may not be a spring-load, I have a very hard time believing that the board would give this grant if they knew the stock was going to tank after earnings. The most likely scenario is that the stock doesn’t really do much, but there is a small probability that it rockets higher after earnings.

Over the past few years, the SEC has been cracking down on the timing of grants while in the possession of material non-public information, legislating new disclosures in Proxy Statements. Would Pinterest’s board really try and pull off a spring-load when the SEC is cracking down? We’ll know the answer in less than 24 hours.