Plan to award Kogan.com bosses $50m in options

The recent sharemarket rout is the pricing point for the proposed issue of $50m in options to Ruslan Kogan and CFO David Shafer.

Ruslan Kogan, left, and David Shafer at Kogan.com’s listing in 2016., Picture: Renee Nowytarger

The board of online shopping company Kogan.com plans to issue $53m worth of immediately in-the-money options to its chief executive and founder Ruslan Kogan and chief financial officer David Shafer, using the sharemarket rout of recent months as a pricing point.

The early estimates for the options package are that for both Mr Kogan and Mr Shafer it will have an exercise price of around $5.28 per share — with that price dragged lower by the collapse of the sharemarket between February and April. Kogan shares on Tuesday raced 49c, or 5.9 per cent higher to $8.85.

The options will vest at a time to be agreed between directors and the two senior executives, but if they were to be exercised now would deliver an immediate profit of more than $21m.

In a trading update, in which Kogan.com also revealed unaudited gross sales up 100 per cent and gross profit up 150 per cent for April, the company disclosed that its remuneration committee had devised new long-term incentive plans for Mr Kogan and Mr Shafer. The company did not disclose the actual exercise price for the options.

These newly-minted bonuses would deliver 3.6 million options to Mr Kogan and 2.4 million options to Mr Shafer. On the current share price for Kogan.com, Mr Kogan’s options are worth $31.8m and Mr Shafer’s options $21.24m.

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The exercise price for the options has been chosen as a three-month weighted average ending on April 30, a period in which world share prices crashed as the coronavirus pandemic wrought havoc in markets across the globe, including in Australia.

During those three months, Kogan.com shares fell to a low of $3.79 from as high as $7.94 before the coronavirus.

Kogan.com shares have since joined in the recent rally and are now sitting at just under $9.

The options given to Mr Kogan and Mr Shafer have no vesting period, according to a statement from Kogan.com, but a vesting condition is that the pair cannot resign before approval of the fiscal 2023 financial report.

The options must be approved by shareholders.

Defending the proposed options issue, Kogan.com said between its initial public offering in July 2016 and April 2020, the company had delivered a total shareholder return of 343.89 per cent.

“Accordingly, the remuneration committee intends to propose a (long-term incentive) plan that both retains and incentivises the executive directors well into the future.”

Kogan.com chairman Greg Ridder said: “Ruslan and David are outstanding business leaders. They have been fundamental in building and growing the high performing company we see today, and shareholders have been rewarded with an exceptional return on their investment since IPO.”

He said the recent performance of the company highlights the “solid foundations of our business”, with strong customer appeal, multiple revenue streams, diverse supply chains, and world-class proprietary systems and processes.

Other than usual annual reviews, no changes to the pair’s fixed remuneration are proposed.

“The remuneration committee has received advice from an independent expert and believe that the proposed option grant will generate long-term shareholder value. We believe the grant is in the best interests of all shareholders.” The identity of that independent expert was not disclosed. The Australian requested an interview with Mr Ridder but none was forthcoming.

In its trading update Kogan.com said the number of active customers grew to 1.95 million as at April 30, with an incremental 139,000 active customers in the month of April.

Gross sales grew by more than 100 per cent, while gross profit was up by more than 150 per cent.

Adjusted EBITDA rose more than 200 per cent. Financial year-to-date adjusted EBITDA to the end of April grew by more than 40 per cent.