Sprint gave stock to employees as an incentive. Here's how that's been working out

Sprint shares have suffered an ugly drop, and employees are feeling the pinch.

A year ago, the Overland Park-based company handed out free Sprint shares to all its employees. The rank and file, some 27,000 strong, collectively picked up $278.8 million worth of Sprint stock to call their own. Top executives picked up more than $130 million worth of shares.

All of it was a promised payoff under a plan to give employees an extra reason to help with the company’s turnaround. The payoff came because the stock’s price had climbed from about $6.50 at the time of the promise in September 2016 to $8 a share last March.

Shares climbed largely on headlines that the company was a merger candidate. Its Tokyo-based parent company, SoftBank Group Corp., might buy rival T-Mobile to merge with Sprint, do a deal with a cable company or even sell out to new owners.

All that came to naught last fall, and Sprint’s share price is now down 39 percent from a year ago. Monday’s closing price was $5.01.

It means those shares once worth $278.8 million are worth $169.7 million.

Sprint’s lower stock price reflects its prospects as a standalone wireless carrier, said Vivek Stalam, an analyst at New Street Research.

“It’s tough to be super positive on the business Sprint has today. They’re sort of reinvesting in it, but that payoff takes time,” Stalam said.

Employees have ridden the stock price down because, under terms of the incentive stock deal, employees can’t sell any of those shares until they vest to their individual control.

Originally that control would not come until September 2020. But changes to the plan now give them control over a third of the shares this September, another third in September 2019 and the last third in September 2020. Those changes apply to employees who are vice presidents or lower on the corporate ladder.

“We heard from employees that the turnaround incentive seemed like it was too far in the distance, so we made some changes in the plan,” Sprint spokesman Dave Tovar said.

Compensation consultant Paul Dorf said such stock incentive plans work wonders for employees when they create value. Think Google, Facebook or Microsoft.

The opposite can happen when value erodes.

“They would love to have the stock but only if it’s going up. Once it comes down, they don’t appreciate it,” said Dorf, of Compensation Resources Inc.

Another change in the turnaround stock plan has softened the blow for the 500 Sprint employees now being laid off. Originally, they would have had to surrender all of their shares when they picked up their last paychecks.

Tovar said the new terms allow them to keep about 55 percent of their shares, though they won’t be able to sell them until the vesting dates this September, next September and in 2020.

Sprint’s share drop also delivers somber news to newly hired employees who weren’t around to collect the shares a year ago.

They’ve got their own turnaround incentive award plan. Originally, it required shares to reach $12 for them to receive stock, but Sprint said it has lowered that threshold to $8.

This article was updated to reflect the $8 target price on new employees' stock incentive plan.

This story was originally published March 26, 2018 at 5:17 PM with the headline "Sprint gave stock to employees as an incentive. Here's how that's been working out."