Trickle-Down Tax Plan? Not at Netflix, Where Execs Eye 2018 Pay Raises

CEO Hastings will take a modest salary cut, but is set to bring in hefty stock compensation

Managing Editor
Dec 29, 2017 at 10:03 AM
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Online streaming subscription service Netflix, Inc. (NASDAQ:NFLX) is making headlines today after the company revealed in an SEC filing yesterday evening that it will be increasing compensation for its top executives in 2018, after the new tax law goes into effect. With NFLX no longer able to take advantage of deductions for performance-based bonuses, many C-suite members are getting a boost to their base salary -- including Chief Content Officer Ted Sarandos, whose annual pay will jump to $12 million in 2018.

On the other hand, CEO Reed Hastings will take a modest pay cut to $700,000, but his annual stock option allowance will clock in at $28.7 million -- a decent boost to this year's $21 million. Sarandos and Chief Product Office Greg Peters will also net healthy increases to their stock-based compensation in the year ahead.

It's been a blowout year for the FAANG stock, with NFLX gaining more than 55% in 2017. The shares have more than doubled from their early 2016 lows, and NFLX is poised to wrap up the year above support at its 80-day and 126-day moving averages. At last check, the stock was up 0.1% to trade at $192.96.

In the options pits, traders have shown a heavy preference towards calls over puts, with data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) showing a 10-day call/put volume ratio of 1.65 for NFLX. This ratio ranks in the 89th percentile of its annual range, suggesting calls have been bought to open over puts at a faster-than-usual clip during the past two weeks.

However, there's still room for pessimism to unwind among NFLX shorts. Short interest fell by 7.8% over the past two reporting periods, but continues to represent nearly 6% of Netflix's float -- an accumulation that represents 4.2 times the stock's average daily trading volume. A continuation of this short-covering activity could keep the wind at NFLX's back as the stock heads into 2018, potentially setting the stage for the shares to cement their status as the top S&P 500 stock during the month of January.

 

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