Wayfair Compensation Shenanigans And Massive Insider Selling: Tilson

Wayfair

Wayfair’s Compensation Shenanigans And Massive Insider Selling by Whitney TIlson

Summary

Wayfair has persuaded investors and analysts to focus on “adjusted EBITDA” and free cash flow rather than GAAP earnings.

The company pays its top executives far below market salaries, thereby minimizing cash compensation costs.

To offset low cash comp, Wayfair gives its top executives large stock/option grants.

The company has instituted a Rule 10b5-1 automatic selling plan to convert the stock/option grants back into cash comp, resulting in massive insider selling by the top eight executives of nearly $7 million per month over the last seven months.

The effect of this scheme is to inflate reported “adjusted EBITDA” and free cash flow.

This scheme is fairly common among tech and venture/private equity-back companies – but Wayfair’s...