A lot of that inbound was people who wanted to discuss the implications of AI in investing: how long we as humans stood a chance against our nascent AI overlords, if AI was better at one type of investing versus another (i.e. it’s probably very good at factors, but can it do event driven?), etc.

But the majority of the inbounds were from people with a simple question: How can I start using AI tools for investing?

So today, the basics. Quick disclaimer up front: I’m completely self-taught when it comes to these tools, and I am sure there are thousands of 24 year old engineers at big tech firms who would look at the primitive ways I’m using AI and laugh their heads off.

But I have been investing “professionally” for over a decade now, and AI has dramatically improved my process over the past few months. So I’m simply sharing some tips and tricks that have helped me improve; I am by no means claiming these are perfect or that there aren’t better ways to do these things. I’m sure there are, and I’d love it if you told me if you knew of any!

So when I say “using AI,” I mostly mean “using Claude Cowork to make you a faster, sharper investor with tools and research you didn’t know were possible.” That’s a different use case than I would have talked about even six months ago; back then I was mostly using AI as a hyper-intelligent Google: research questions, industry overviews, slide drafts, etc.

Useful, but limited to basically being my best senior analyst (who I couldn’t quite trust fully due to worries hallucinations). Cowork changed that; instead of just using it as a researcher, I’m telling Cowork exactly what I want and having it build tools for me to do that, in a way we can iterate on and improve over time.

If you don’t know what Cowork is or haven’t tried it yet: download the Claude desktop app and open it to Cowork. Here’s a very basic Cowork overview if you want one, and Anthropic has a free training portal (Skilljar) that walks you through a bunch of Claude use cases. All of those will help, but you honestly don’t need any of them. The best way to learn Cowork is to simply start using it. Pick something you want done, ask Claude to do it, and you’ll see how powerful Cowork can be pretty quickly.

That said, a little setup can go a long way to helping you down the road. One of the problems I found I had is that I use it so much that a lot of old research was getting lost if I wasn’t very careful to save everything down. I think I found a fix to that problem, and I’m going to share it with you both because I think it’ll be useful and because it should help jump start your Cowork journey if you’re starting from literal zero.

The key to Cowork (for me at least) is projects. Projects are individual folders within your Cowork that will remember and reference past research inside the project and (importantly) that allow you to set up rules the project will always follow. So if you’re working in a project you can say something like “every time I ask you to pull information from a financial filing, please automatically convert it to US dollars” and going forward every time you pull financials in that project (and only that project) it will follow that rule.

What’s great about projects is that you can use them to iterate over time. So, for example, you can ask Claude to research a company in the project, and then when it returns something you can tell it “you forgot to summarize the risk section; please remember to do that for every company going forward” and over time Claude will learn from all those prompts.

So that’s projects in theory. Here’s what makes them powerful in practice: say my favorite set up is companies where the CFO has been buying stock on the open market in the past three months. I can build a project, tell it that’s what I care about, and from then on every company I research in that project will automatically flag any recent CFO insider buying.

Let me walk you through setting up a project for research; doing so will both help you understand projects and show how I’ve used projects to better track my research. Below is a screenshot of my Claude Cowork; I’ve pressed projects (in the left column) and “new project” (in the top right) to bring this project up. You’re going to want to press “start from scratch”.

Press “start from scratch” and you’ll get the prompt below.

That instructions box is the most critical one: Claude will remember it and treat everything that you do in the project that way going forward. So I’d encourage you to get as detailed as you can there. Heck, use Claude to your advantage. Start a new task in Cowork, tell Claude exactly what you want to do with that project, and have Claude generate the project instructions for you. Then read the instructions, have Claude modify them if they don’t fit exactly what you want, and when they’re workable paste them into the project.

In my example, I wanted a tool that I could ask about random stocks as I research them, and Claude would remember them going forward. So I told Claude exactly what I wanted; here’s the exact prompt I used.

I do lots of research on companies in cowork (for example, the XYZ proxy summary). However, these are kind of one offs, so i don’t want to create an individual project for each.... but these also tend to get lost over time. what’s a good way to save these for future reference but not overwhelm myself with filing

For example, what I’d love is to be able to say “have I done work on stock XYZ”, and then have cowork tell me everything we’ve researched on the company so far.

Claude generated a list of instructions for me. I went back and forth with Claude a few times to tinker with exactly what it was giving me, and eventually was happy enough with the results to paste them in the project. I’ve been thrilled with the results. I now have an organized, searchable method for doing Cowork research on companies, and I can keep tuning the project over time for what I like and don’t like.

So, look, that’s the real basics of using Cowork…. but the sky is truly the limit if you’re willing to iterate.

And, of course, if you’ve got a better mousetrap, please reach out. My emails are always open, and I’d love to swap notes. I’m not claiming any of this is the optimal way to use these tools; I’m just sharing what’s working for me. If you’ve found something that works better, I want to hear about it.

This podcast is sponsored by AlphaSense.

Earnings season has always been a test of speed and discipline—but the real challenge isn’t just keeping up. It’s cutting through the noise, tracking what matters across dozens of companies, and turning information into insight before the next call begins. AlphaSense’s AI Playbook for Earnings Season shows how leading investment and corporate strategy teams are using AI-driven workflows to stay ahead—summarizing transcripts instantly, monitoring competitors in real time, and surfacing the metrics that move markets. The difference is how the work gets done. Instead of juggling spreadsheets, notes, and disconnected tools, teams can centralize earnings intelligence, validate consensus with trusted research, and act on signals faster—before opportunities pass. You can download your complimentary copy of The AI Playbook for Earnings Season here. And if you’d like to try AlphaSense for free, request your trial at alpha-sense.com/YAVP.

Please follow the podcast on Spotify, iTunes, or YouTube! And please be sure to rate / review the podcast if you enjoy it, or share it with someone else who would enjoy it (more listeners is a critical part of the flywheel that keeps this Substack and podcast going!).

Share Yet Another Value Blog

Transcript for paid subs begins below (The initial transcript is AI-generated and is replaced with a professionally edited version when available)

Disclaimer: Nothing on this podcast or on this blog is investing or financial advice; please see our full disclaimer here. The transcript below is from a third party transcription service; it’s entirely possible there are some errors in the transcript.

Read more

Let me start with the tool: I scheduled a recurring task on Claude Cowork. Every Sunday, it generates five new ideas for me to research that week, along with the reason it recommended each idea and a short summary of the thesis.

Then, throughout the week, whenever I stumble on an idea I like (in an investor letter, on a substack post, etc.), I toss the idea (with a link to the write up or a copy of the PDF) into the project the task lives in. I also include a few lines on what I like about the idea that I’m adding.

Finally, whenever I research an idea that Claude has given me, I give it feedback on the idea (you recommended XYZ and I didn’t like it for this reason; I really liked your recommendation of ABC, etc.).

I’ve been doing this for a few weeks…. and the project has gotten really good. For example, last week its top recommendation was ANAB, which had just done a taxable spinoff with a looming return of capital decision (as well as a bit of ongoing legal drama). If you were playing “Andrew Walker buzzwords bingo”….. well, you’d have just hit the jackpot with that sentence. The other recommendations from the project were pretty solid as well: one recent spinoff, two 13-Ds where the activist pitch focused on an SOTP unlock, and one company that was spun ~a year ago and set to get added to a bunch of indices in the near term.

Importantly, the project has been improving. For example, the first iterations were really centered on super microcap 13-Ds, and over time I’ve trained it that market caps get graded on a loose curve (a $10m company needs just an overwhelmingly insane pitch to get recommended, a $50m company needs a much stronger pitch than a $250m company, and a $2.5B and a $5B company are basically equal).

So that’s the crazy useful AI “tool” that I’ve kind of custom built. IDK, maybe I’m overestimating how novel this idea is. It does seem pretty obvious, but I talk to a lot of investors and I haven’t had a single one tell me about using AI for iterative idea generation like this.

But if I find that tool so useful / novel, why is it causing an existential crisis for me?

Right now, the tool is just helping me find unique ideas that fit my style…. but run that process forward with a few months of training and AI improvement. If I give that system enough feedback, at some point am I even relevant to the process? Couldn’t it identify ideas with my trained “Andrew Walker” filter and eventually decide what ideas to put on and take off?

And remember that I built this model on my own with consumer grade resources. If you’re a multi-billion dollar manager with a nearly unlimited IT budget plus access to actual software developers and a historical backlog of millions of trades over the past few years from all of your teams, how much further could you take my idea? How close are they already to the point I’m worried about hitting (where the model can identify and execute trades without the human)?

As someone who invests for a living, it terrifies me. A few months ago, there’s no chance I could have built a tool like this off the shelf, and AI is improving so fast that I built this little project with less than an hour of prompting. How much further / faster can it go? Are humans going to have jobs as investors anymore? Are we even going to be able to compete with AI in a few months?

Again, I’m terrified… but I think the answer is clear. Humans are going to increasingly need to answer one question: “What exactly am I adding that the AI cannot learn?” The edge continues to move away from simply reading 10-Ks all day and toward finding non-obvious data, asking better questions, and making judgment calls in places where the information is still messy.

P.S. Most of the investors I talk to are still using AI as a senior analyst for initial research, a souped up version of Google, or a way to automate web scrapes. Those are all great use cases, but I think they barely scratch the surface of what these tools can do. If you’re using AI in a genuinely interesting way to become a better investor, I’d love to chat.

Second, please remember you can always reach out to me if you have questions or want to swap thoughts on any…

Read more

So, yes, it’s been a broad based melt up…. but there is something interesting under the hood. The two largest components of the index are AVGO and AMD, and both gave out unusually large “dark arts” style grants1 in the past few months.

The timing of those grants is probably not a coincidence.

Let’s start with AVGO. In FY25, the company did >$20B in AI revenue. They just gave the CEO a package that requires AI revenue to grow to $90B by FY2030 in order to vest in full, with a high-end case where AI revenue grows to >$120B.

Just hitting the target range would require AI revenue to almost 5x in five years….. that’s insane! But, if you’ve been following the dark arts series at all, you know that companies don’t give out these big awards for no reason at all…. particularly awards that could reasonably be worth $1B if they hit in full.

AVGO reported AI revenue “grew 106% year-over-year, above our forecast” in Q1, while also noting “Our AI revenue growth is accelerating.” It seems they’re well on their way to hitting those targets (and, in turn, the CEO is on his way to adding another 10 figures to his net worth!).

Or consider AMD: in Feb., the CEO was given PSUs that require the stock to return 10%/year for the next five years just to start vesting. The target vesting percentage requires the stock to do 15%/year for five years; that’s a fantastic result, and it’s the baseline for the reward.

AMD’s stock was in the low $200s when the grant was made. With the current stock run up, AMD is trading in the mid-$300s…. so the low end of the vesting is already in the money, and it will require much more pedestrian stock performance from here for the CEO to vest in full and receive a ~$250m windfall.

I’ll be writing more about the implications of the acceleration over the next few days, but I can’t stop thinking about two things here.

First, whether you believe in my dark arts “companies grant awards that they have some fundamental reason to believe they will vest” theory or not, it’s hard to believe that the two largest components of the semiconductor index would start granting mammoth upside awards without a ton of signs demand is accelerating.

Which brings me naturally to the second thing that’s stuck in my mind: it’s not like 2025 was a slow year for these companies. If they’re seeing signs that things are inflecting even harder (and now the market is starting to see it and believe it if the stock prices are any indication!)…. what are they seeing? And what are customers telling them about demand and their forecasts that makes AMD and AVGO believe the inflection is heating up?

To be continued (and don’t forget to sign up to see future posts in this series!)…

This podcast is sponsored by AlphaSense.

Earnings season has always been a test of speed and discipline—but the real challenge isn’t just keeping up. It’s cutting through the noise, tracking what matters across dozens of companies, and turning information into insight before the next call begins. AlphaSense’s AI Playbook for Earnings Season shows how leading investment and corporate strategy teams are using AI-driven workflows to stay ahead—summarizing transcripts instantly, monitoring competitors in real time, and surfacing the metrics that move markets. The difference is how the work gets done. Instead of juggling spreadsheets, notes, and disconnected tools, teams can centralize earnings intelligence, validate consensus with trusted research, and act on signals faster—before opportunities pass. You can download your complimentary copy of The AI Playbook for Earnings Season here. And if you’d like to try AlphaSense for free, request your trial at alpha-sense.com/YAVP.

Please follow the podcast on Spotify, iTunes, or YouTube! And please be sure to rate / review the podcast if you enjoy it, or share it with someone else who would enjoy it (more listeners is a critical part of the flywheel that keeps this Substack and podcast going!).

Share Yet Another Value Blog

Transcript for paid subs begins below (The initial transcript is AI-generated and is replaced with a professionally edited version when available)

Disclaimer: Nothing on this podcast or on this blog is investing or financial advice; please see our full disclaimer here. The transcript below is from a third party transcription service; it’s entirely possible there are some errors in the transcript.

Read more

This podcast is sponsored by fiscal.ai

Fiscal AI is a modern data terminal built for investors who want an institutional-grade platform without the complexity. I use Fiscal AI to research my holdings, find new investment ideas, and deepen my analysis. It’s fast, intuitive, and has genuinely helped my research process. Check it out at fiscal.ai/yav —for two weeks free, plus 15% off any of their paid plans.

Please follow the podcast on Spotify, iTunes, or most other podcast players, as well as on YouTube if you prefer video! And please be sure to rate / review the podcast if you enjoy it, or share it with someone else who would enjoy it (more listeners is a critical part of the flywheel that keeps this Substack and podcast going!).

Share

Disclaimer: Nothing on this podcast or on this blog is investing or financial advice; please see our full disclaimer here. The transcript below is from a third party transcription service; it’s entirely possible there are some errors in the transcript.

Transcript for paid subs begins below (Note: in order to get these up quickly, I post an AI generated transcript alongside the podcast. A professionally edited transcript comes a few days later; I replace the AI generated transcript once the professional one is available)

Read more

• FRMM: a dark arts case study in strangeness

• CAG: when “aggressive” PSUs mean almost nothing

• GTM: aggressive buyback or value-destructive YOLO?

• MMED: are the PSUs telling us anything about the post-IPO path?

• SKLZ’s big Christmas present

Let’s dive in:

• FRMM: a dark arts case study in strangeness

FRMM’s board and SEC filing team had a busy day on April 3.

That alone is a strange statement. April 3 was Good Friday, meaning it was a stock market holiday, but the SEC remained open because it was not a federal holiday. In my experience, companies try to jam in 8-Ks with news that they don’t want investors to notice on days when the SEC is open and the market is closed, so the fact that FRMM filed an 8-k alongside seven form 4s should raise eyebrows.

What did FRMM file? Well, they did four things:

1. They gave all of their directors big stock grants. Each director was given >200k RSUs; with FRMM’s stock trading for ~$2.75/share, that was a nice little $550k windfall for each director. Not bad for working on a Friday!

2. They gave their CEO a “one-time initial equity award and a pro-rated 2025 annual award” and their CFO an equity award. These awards mirrored each other and consisted of 60% PSUs with share price targets and 40% RSUs.

   1. The stock price targets for these awards were reasonably aggressive. A third vest at $5/share, a third at $7.50, and a third at $10/share. FRMM’s stock was ~$2.75/share when the awards were granted and they expire in five years, so the stock would need to do reasonably well even to vest at the low end.

3. They halted their ATM equity agreement (ok, this 8-k was filed April 8, but given the timeline I don’t think it’s crazy to say the board and management made the decision to halt on April 3!).

4. They approved an investment into “AI Chip Infrastructure Financing to Purchase NVIDIA GPUs” that was targeting “Returns in the Mid-Teens”

   1. Again, this announcement was made April 8; given the timeline, I don’t think it’s crazy to think it was approved April 3!

They followed those moves with a big announcement on April 17: the initiation of a share repurchase program and the establishment of a special committee to unlock value. The special committee would “examine the full range of value-maximizing pathways”, including mergers (and here the PR reveals that people have approached the company about a merger2) and a liquidation of the company.

The market liked FRMM’s actions; just two weeks into their five years PSU package, the CEO and CFO are almost in the money on the low end of their vesting targets, and the board is already up ~50% on their RSUs.

In many ways, FRMM is a classic “dark arts” case study (perhaps even more so than my prior case study of ACHC). FRMM management and board granted themselves big equity upside exposure and then went through a series of announcements designed to boost the stock price and maximize shareholder value.

But I think FRMM’s corporate background actually makes the pivot even more interesting. FRMM was one of the original Ethereum DATs; in July 2025, what was then 180 Life Sciences raised a ton of money to become ETHZ (they’d eventually rebrand as FRMM; we’ll get there). As the shine came off the DAT business model, ETHZ has shifted wildly on what to do with the huge slug of capital they raised and how to generate shareholder value. In just the past six months, they have:

• October 23: Announced a strategic partnership with Liquidity.io, including a $15m equity investment.

• October 27: sold $40m of ETH to facilitate stock repurchases at a “significant discount to NAV”

• December 3: spent $10m for a 20% stake in Karus to “Power AI-Modeled Auto Loan Tokenization”

• December 10: took a 15% stake in Zippy for ~$20m to “Tokenize Manufactured Home Loans On-Chain”

  • They also “streamlined” their capital structure by paying down $516m in converts

• February 5: “Purchases Manufactured Home Loan Portfolio, Plans Tokenization on Ethereum L2”. ETHZ buys ~$5m of manufactured loans in the transaction.

• February 12: spends ~$12m to buy jet engines and then “Announces First Ever Tradable Tokenized Aviation Assets on Ethereum Network Secured by Jet Engines on Lease with a Leading U.S. Air Carrier”

• February 25: rebrands from ETHZ to FRMM to reflect “Next Step of Strategic Evolution Toward Institutional-Grade Real-World Asset Tokenization”

• March 9: finances a $10m warehouse to establish an “Auto Loan Warehouse Facility Enabling 24/7/365 Loan Settlement via Blockchain Infrastructure”

• March 31: FRMM reports Q4 results; notes they’ve sold the “vast majority” of ETH holdings and their current cash position is >$100m. On their earnings call, CEO estimates NAV at “$175 million-$185 million today, with 20.3 million shares outstanding.”

That’s a lot of asset activity; the reason I highlight it is because FRMM’s market cap is under $100m even after the pop from the strategic alts announcement. The CEO is describing their NAV as ~$180m, and within that NAV there are a lot of ~$10m VC style investments into blockchain businesses. Curiously, that $180m NAV number would imply $9/share in value…. just below where the high end of the CEO’s stock priced link PSUs vest.

FRMM’s move from <$3/share to approaching $5/share on the strategic alts announcement was basically the market giving them credit for their cash balance…. but there’s not much value built in that price for FRMM’s other investments. Perhaps the market is right…. but there’s no one better positioned to know their value than the board and CEO, and he and the board agreed to a share price linked package that implies a decent bit of value from those investments.

FRMM is a great reminder that stock grants do not just signal undervaluation. They can also align incentives for management to take the actions needed to unlock that value.

• CAG: when “aggressive” PSUs mean almost nothing

I’ve detailed a lot of different examples of dark arts in this series. I think it might be natural to think “oh, we should just follow every company that gives stock price based incentives and buy a basket of them.”

Do I think that’s the worst idea in the world? No, I could think of plenty of worse investing strategies! But I also doubt a strategy like that is going to generate any alpha. It’s just too broad. To me, you want to use the corporate dark arts to identify a management team and board that are taking an outsized, unusual swing on the stock and then marry that swing with your own view of a fundamental inflection or investment thesis on the business.

So let’s do a mini-case study of a meaningless signal. The type that I try not to highlight in this series (or invest in!). CAG just announced a new CEO; as part of his pay package, he was given $4m of stock price based PSUs that require the stock to hit $20-30/share within three years to vest.

CAG’s stock is currently trading for ~$14/share, so those are decently aggressive IRR targets. ~12.5%/year on the low end; ~29%/year on the high end. And $4m is no small amount of money!

But CAG is paying their CEO a $1.15m salary, a target annual bonus of 150% of his salary, and an “an annual equity grant value target of $7.3 million”; all together, he’ll be taking in >$10m/year as CAG’s CEO. I’m sure, all else equal, he would like the stock to go higher and all of those options to vest; every CEO wants their stock higher all else equal! But I’d also argue that CAG’s CEO is much, much more likely to be motivated by job preservation and his annual salary / bonus than he is by those PSUs.

Contrast CAG’s package to something like the RELY package I mentioned in the first part of this series. There, the new CEO is making $350k/year in salary and, as far as I can tell, no annual bonus. Instead, his whole motivation is an aggressive series of PSUs that would be worth $70m+ if he can get the stock price up. That’s a grant that screams alignment / everyone thinks they can get this stock up!

• GTM: aggressive buyback or value-destructive YOLO?

GTM is interesting because it presents the dark arts bull case and the dark arts bear case at the same time: management has a wildly upside torqued comp package and the company is embarking on a massive share repurchase program…. but the AI fears are very real and the market clearly thinks this is a structurally broken business. So are the massive buybacks management’s way of showing the AI fears are overblown, or does the comp package incentivize them to throw good money after bad and buyback stock even if the business is melting away?

Let’s back up. In late November, GTM gave their CEO one of the most upside-torqued pay packages I’ve ever seen. Mojo had an (excellent) post detailing the package and the (likely) behind the scenes activism that led to it (and the post is well worth reading), but the key points of the package are that the CEO was granted a ton of options that required the stock to, at minimum, >4x in 10 years to start vesting….

Obviously, that’s an aggressive package, but the rewards were fantastic if the CEO could hit them: the package would be worth ~$400m if the high end of the options vested.

So, as of late November, GTM and their CEO should be fully aligned with driving towards massive and explosive shareholder value creation. That alignment came just in time for the SaaSpocalypse, and GTM’s stock has been slaughtered:

GTM’s response to their share price has been interesting. You’ll see a lot of SaaS companies say “we’re unique; AI won’t hit us”…. but then they’ll do nothing as their share price dwindles to nothing. GTM is not sitting still as their stock melts; in 2025, they repurchased ~12% of their stock for ~$10.06/share. With the stock getting smashed, they believe they “have been presented with a generational opportunity to create value” and got “Board authorization to repurchase more than 50% of the company's outstanding shares.” They also noted their “commitment to using the majority of the cash we generate to repurchase ZoomInfo shares for as long as that is the best and highest return use of our free cash flow and at these price levels.”

That all sounds incredible…. but I will admit to wondering if the company is accurately seeing the playing field. The way most investors blow up is doubling down on a stock again and again as it heads to zero. Why should it be any different for companies? If they thought the stock was a great buy at $10/share, and now it’s at $5/share, do they have a great grasp of the fundamental value and outlook? Or is it possible buying back stock is actually negative expected value for shareholders but positive expected value for insiders because buying back stock aggressively makes it easier for them to vest / hit those aggressive share price targets if the company can pull the proverbial rabbit out of its hat?

• MMED: are the PSUs telling us anything about the post-IPO path?

MMED is a recent IPO from Medtronic (MDT); they IPO’d in early March at $20/share, and Medtronic continues to own ~90% of them. It was “the second biggest MedTech IPO in history”, and MDT has been clear that they will eventually exit their full position (likely through an exchange offer3).

What makes MMED interesting is that, alongside the IPO, basically every key executive (CEO, CFO, GC, etc.) was given PSUs that vest if MMED stock hits $32.05 by the later of March 2027 or when MDT disposes of their MMED stock.

Again, MDT has already said that they plan on exiting MMED in ~6 months, so it’s probably safe to assume that the “later” will be March 2027. MMED IPO’d at $20 and is currently trading in the mid-teens; for those PSUs to vest, management is going to need the stock price to more than double in less than a year.

Perhaps they’ll never get to that price…. but MMED got FDA approval for their next gen insulin pump soon after the IPO, and I have to imagine that management and MDT at least saw some fundamental path to hitting that stock price target if they gave every high level employee a package that called for it. And I’d note that given MMED’s very small float while MDT still owns 90%+ of the stock, you could imagine that a few of the levers MMED could pull could cause the stock to overshoot on the upside.

There are a lot of companies that incentivize through stock price, but it’s pretty rare for a company with a thin float and a major controlling shareholder intent on disposing their shares to have such an aggressive stock price incentive. It’s a potentially explosive combo; will be fascinating to watch.

• SKLZ’s big Christmas present

2025 was a rough year for SKLZ.

The main issue was accounting related. They were unable to get their 10-K filed on time in March, and the accounting issues cascaded from there. They didn’t get their 10-K filed until November, and then they couldn’t file their Qs until mid-December. To add insult to injury, on December 18th SKLZ filed an 8-k noting they’d hired a new CFO who would start in January…. but on December 23 the new CFO “withdrew his acceptance of the Chief Financial Officer position.”

Not great, Bob.

On top of the messy accounting / finance functions, operational performance wasn’t exactly great either; while revenue grew a bit, cash burn was enormous (>$50m in adjusted EBITDA loss), and the company went current on their debt (which is due in December 2026).

After such a rough year, you could imagine everyone at the company was looking forward to a nice, relaxing Christmas. SKLZ’s board certainly did their best to help make everyone comfortable: on December 23, they filed an 8-k noting they’d given “ordinary course 2025 annual long-term equity incentive grants to its employees”; in addition, the company gave the CEO a special one time grant of PSUs that vested at increasingly aggressive stock price targets:

Those special PSUs vest in four years, and SKLZ stock was trading <$5/share when the awards were given. So, on the low end, SKLZ needs to be a 4 year double for the awards to even start vesting. On the high end, you’re looking at a 4 year four bagger.

I have no view on SKLZ. But I highlight it because the company is seemingly a mess and they filed an 8-k after 4 PM on December 23 noting they’d given their CEO a special award that could be worth almost $20m. As detailed in the FRMM case study, when companies make filings around holidays, it’s generally because they’re trying to hide the information from investors, and I’d argue both the timing and the structure of this grant (with the awards being really buried inside the 8-K’s text) suggest a company that is trying not to draw investors’ eyes to the award. That’s curious; most companies try to shout from the rooftop when they’ve given their CEO an award that aligns them with the stock going up (GME certainly did)!

Why was SKLZ so shy about this award? Is it possible they’ve got some rabbit in their hat that makes hitting the targets likely, and they didn’t want shareholders to accuse them of tilting the scales for their executives when the stock takes off and the execs make a fortune?

Ok, that’s it for today. See you early next week for part 8 (and, if you haven’t yet, don’t forget to subscribe to get the rest of the series delivered to you!):

1. A case study: A question I’ve frequently gotten since I started this “corporate dark arts” series: who cares? All management teams are greedy; does seeing management get a little greedier really have any signal value? My answer is (obviously) yes. But don’t take my word for it; let me present ACHC as a great example of why it can pay to pay attention to executive compensation signals!

2. Building the premium dark arts basket: I’ve already written up my favorite dark arts setup on the premium side, but there are three more stocks that I think are worth tossing into a “dark arts basket”. One combines a botched dark arts attempt with a heavy event angle, one is a “hero or zero” (the stock could easily 10x or be a zero), and one has a management team suddenly giving out stock price linked packages to the whole C-Suite while the environment underneath seemingly inflects for the better.

Let’s dive in:

• ACHC case study: these things can play out fast

In January, ACHC hired Debbie Osteen back as CEO. Debbie had been CEO of ACHC from December 2018 to March 2022, during which time ACHC had outperformed both the indices and some loose peers2:

Things at ACHC have fallen apart without her; the stock has collapsed and drastically underperformed peers:

ACHC has a lot of Medicare and Medicaid exposure; healthcare businesses with big government exposure are often subject to reimbursement changes outside of their control. So it’s probably not fair to lay all of ACHC’s drastic underperformance on her successor…. but stocks rarely collapse ~80% over <4 years without quite a few strategic and operational missteps.

Given those operational issues, investors were rightly excited when Debbie stepped back into the CEO seat. I mean, investors were really excited to have her: the stock was up >20% on the news she was coming back. And the board was eager to have her back too; they gave her >1.1m options that vested at different prices.

Those options were struck at $11.68/share, which is where ACHC was trading before Debbie came back. Obviously, that’s an aggressive options package; yes, they’re 10 year options, so Debbie has a lot of time, but the stock needed to more than double just to vest the first tranche… but with an aggressive options package comes significant upside. ACHC was trading ~$70/share when Debbie left in early 2022; if Debbie could get the stock back to that level, this package would be worth ~$70m. Debbie makes ~$1m/year in salary with a target bonus of ~$1.3m, so I don’t think it’s a stretch to say that this options package will leave her very stock price motivated.

You can probably guess what happened next. In February (~a month after Debbie took the CEO job back), ACHC reported results that beat guidance. More importantly, 2026 guidance was much better than expected; I saw sellside notes with quotes like “we believe Debbie has drawn the line in the sand with this guidance, which is way above buy-side expectations” and “beat on EBITDA in 4Q and formal 2026 guidance that we believe came in comfortably above both bull and bear expectations.”

The stock has been a rocket ship since. It’s almost doubled on the year, and it seems like the first tranche of Debbie’s options will vest imminently:

I’d call ACHC about as perfect a case study in the dark arts as you can get. Debbie took the CEO role in late January. The board and investors were thrilled to have her, and she and the board negotiated a massive comp package that called for the stock to hit $25 on the low end.

Does that mean the stock was guaranteed to hit $25? Absolutely not! But I would wager quite a bit of money that Debbie and the board both had a very good idea what the 2026 guidance was going to be and how the stock market was likely to value the company on the heels of that guidance, and they priced the options with that reaction in mind.

ACHC is a clean example of why these setups are worth tracking: boards do not hand out aggressive packages like these by accident, and when the signal is real, it can matter fast. This series has already covered several interesting dark arts setups, but there are three current examples worth a deeper dive as part of a “dark arts” basket: one event-driven, one distressed, and one with both turnaround and M&A optionality.

Read more

This podcast is sponsored by Trata

I already know you’re going to like trata. Why? Because you’re reading this blog post, meaning you’re interested in this podcast. And trata is just like this podcast (though without the handsome host!). Trata is anonymized transcripts of buysiders discussing stocks they are following and what they really think will drive the stock. I’ve been mentioning it on the podcast for months, and the most frequent complaint I hear from people who check it out is they wish trata had more content on more of their stocks. Plus, if you’re interested in DKNG, you can see the transcript I used to prepare for this podcast here.

Please follow the podcast on Spotify, iTunes, or most other podcast players, as well as on YouTube if you prefer video! And please be sure to rate / review the podcast if you enjoy it, or share it with someone else who would enjoy it (more listeners is a critical part of the flywheel that keeps this Substack and podcast going!).

Share

Disclaimer: Nothing on this podcast or on this blog is investing or financial advice; please see our full disclaimer here. The transcript below is from a third party transcription service; it’s entirely possible there are some errors in the transcript.

Transcript for paid subs begins below (Note: in order to get these up quickly, I post an AI generated transcript alongside the podcast. A professionally edited transcript comes a few days later; I replace the AI generated transcript once the professional one is available)

Read more

Today, I want to highlight two companies intertwined at the hip that might be practicing the corporate dark arts: Lionsgate and Starz. The interesting thing here isn’t just that the companies have a hilarious history of shooting themselves in the foot (though they definitely have that)…. what’s interesting is that both companies suddenly started giving their CEOs incentive packages with aggressive stock price hurdles. Aggressive stock hurdles on their own are interesting, but they matter a lot more when a company suddenly adopts them after years of not using them. The question is always why does a company decide to make a switch to aggressive stock price comp? In this case, I think the signal relates to M&A: after over a decade of teasing a sale, LION may finally be serious about selling itself, while STRZ as a standalone might see a path to acquiring their way to growth.

But, before we get to that shift in comp, let’s start with some brief corporate history.

• Brief corporate history

Perhaps no company has bungled the media landscape more over the past decade than Lionsgate / Starz; they’ve shown an almost uncanny ability to choose the wrong path at basically every turn. The original sin was the 2016 merger that brought the two together; in 2016, Lionsgate bought Starz for ~$4.4B. The deal almost instantly proved a poor fit as the media landscape shifted against them, but management compounded the mistake by repeatedly overplaying its hand when chances to sell emerged. The headliner here would be 2017, when Hasbro offered “more than $40/share” for Lionsgate and Lionsgate rejected it as too cheap(the stock would trade <$30 within months). Then Lionsgate had the chance to snatch victory from the jaws of defeat and sell Starz to CBS for $5B in 2019. They passed (demanding $5.5B); to show you how disastrous that decision was, STRZ is currently a standalone publicly traded company with an enterprise value under $1B.

Alright, let’s fast forward to today. In late 2023, Lionsgate merged a piece of their studio business with a SPAC. That merger was the first step in a plan to fully separate Lionsgate studios from Starz; they would conclude the plan with a full split in mid-2025.

LION has been pretty clear since they first started talking about splitting studio and STRZ up: the studio side deserved a premium multiple and was a valuable strategic asset, and by separating it out from a rapidly declining (and low multiple!) STRZ business both sides increased strategic optionality (LION likely to explore a sale or at least serve as a neutral “arms dealer” to the streamers; STRZ to pursue M&A and gain scale in some form).

• LION post spin

Since the spin, LION’s management has been clear: they are open to a sale. For example, here’s a fun quote from a recent conference: “we're very cognizant of those values and the ability to create outsized valuation for our shareholders in the world of consolidation. So I think the library just becomes more scarce than ever.” And that quote is far from the only quote I could show you; their Vice Chair (Michael Burns) went on CNBC in the middle of the WBD bidding war to talk about how in demand their studio business was and how big the synergies would be if a variety of strategic bidders combined with them! And there are rumors that Legendary has been looking at LION for most of the past year.

However, I will be honest: as a longtime follower of the industry, LION saying that they’d be an attractive target and are considering selling themselves has a “boy who cried wolf” feel. They’ve been saying the same thing for years; for example, in early 2018, Michael Burns went on CNBC and said LION is a “pint-sized bite for some of these giant market cap companies” and therefore would “talk to anybody at any time” about a merger; does that quote sound at all like the quote he gave CNBC in the WBD bidding war last December?

So I’ve generally been pretty dismissive of the rumors that LION is looking to sell; I’ve been BURNed (pun on Michael Burns last name extremely intentional) way too many times to believe something is happening here.

Which makes this 8-k filing updating and extending their CEO’s contract so interesting. It makes me think this time might actually be different and that the company really might sell themselves this time. There are two things in particular worth calling out from the filing.

First, the CEO’s old deal ran through July 2029, and this deal extends him two more years. July 2029 is a long way away; it’s not like LION needed to extend him right now. Curious.

Second, the big kahuna: the agreement gives him a mix of options and PSUs that vest in five years and require the stock to hit prices much higher than the current stock price (~$11/share as I write this).

Any package that requires the stock to go up substantially is interesting… but two things stand out to me about this package.

First, I’ve looked at a lot of these types of packages. It’s exceedingly rare to have the lowest tranche ($17.50 in this case) trigger significantly more options / shares to vest than the higher tranches. In general, companies have each tranche vest a similar number of shares, or they have the higher tranches vest even more shares (paying more for significant share appreciation). I can’t remember a package where the lowest tranche vests so much more than the higher tranche.

Second, Jon has been CEO of Lionsgate since 2000. I went through the six contracts and extensions he’s signed since 20131; this contract is the only one that has any type of share price incentive or target in it. That’s quite the signal; it’s really strange for a company to change its comp practices like this, and companies generally do so for a reason!

Combine those two, and that’s why I think the M&A rumors are real this time. Jon has been CEO for 25+ years. He’s in his mid-70s. He just got a pay package that has share price targets in it for the first time. I’d suggest that this deal serves as a sweetener for him to sell the company, and that he and the board are pretty confident the company goes for $17.50+ in a deal and that’s why the majority of the payment sits there, with the two higher packages there to give him extra juice if the bidding gets really frothy.

So that covers the studio side… but the STRZ side is perhaps just as interesting.

• STRZ post spin

Let’s be clear: the STRZ business is challenged. It’s a completely subscale premium channel without a studio. There’s not really a reason for it to exist anymore; it really needs to sell or merge with something.

But that doesn’t mean it’s not interesting. Like LION, STRZ just gave their CEO a contract extension that, for the first time, had share price targets to vest. And those targets are aggressive and fast; the first tranche requires the stock to hit $40/share in 2026 (an almost four bagger inside of fifteen months from signing!) and the final tranche calls for the stock to hit $50/share in 2028.

That is a fascinating comp scheme. I’d also note that STRZ is optically very cheap. The company has a market cap of <$300m and has ~$600m in debt for a ~$900m EV. They did $200m in OIBDA in 2025, so they’re trading for maybe 4.5x trailing OIBDA and they’re guiding to ~$100m in unlevered free cash flow in 2026. A $40/share stock price would put their trailing OIBDA multiple around 6.5x and their unlevered free cash flow multiple at ~12x. Not crazy!

You could imagine a world where STRZ tries to hit those comp targets by buying back stock as fast as possible at these low multiples, but it seems they’re going to go the other way and become an acquirer. Here’s their Q4 earnings call:

That “we can acquire profitably angle” becomes even more interesting when you think about the timing of STRZ grant: November 2025. That grant comes right before Comcast completed the Versant spin-off and in the middle of the WBD bidding process. While STRZ business is challenged, it would likely have some synergies with a lot of legacy media assets. Perhaps STRZ looked at all of the pending merger activity and thought “hey, we’re going to have the potential for some very accretive M&A in the near term; we need to get our CEO a package that incentivizes him to get creative”?

One last interesting angle at STRZ: in mid-March, Byron Allen bought Steve Mnuchin’s 10%+ stake in STRZ in mid-March. Allen’s a media mogul who has been floated to a variety of media assets (Tegna, Paramount, and several others… though most of his offers have failed). Perhaps he wants to merge STRZ with his other media assets, or maybe he wants to use STRZ as a piece in a larger consolidation play…

• Conclusion

Here’s what I hope you’ve taken away from this piece: over the past decade, Lionsgate has made the wrong move at basically every turn.

But this time might actually be different. On the heels of the WBD / PSKY / NFLX bidding war, the demand for studio assets seems insatiable, and there simply aren’t many standalone studios out there. Lionsgate has said for years that their assets are strategically valuable, but they’ve never seemed willing to pull the trigger. The CEO’s new contract suggests they’re getting ready to make him whole / incentivize him in a sale, and it’s the first time they’ve ever really prepped him for that.

On the other side of the coin, STRZ is in a tough spot… but it’s really cheap, and the CEO is highly incentivized to make it work. It’s not a perfect set up, but the upside is enormous if he can pull it off.

Like many investors, I’ve been BURNed (pun again intentional) over and over by Lionsgate. But the incentives here are really screaming that this time is actually different2.

This podcast is sponsored by fiscal.ai

Fiscal AI is a modern data terminal built for investors who want an institutional-grade platform without the complexity. I use Fiscal AI to research my holdings, find new investment ideas, and deepen my analysis. It’s fast, intuitive, and has genuinely helped my research process. Check it out at fiscal.ai/yav —for two weeks free, plus 15% off any of their paid plans.

Please follow the podcast on Spotify, iTunes, or most other podcast players, as well as on YouTube if you prefer video! And please be sure to rate / review the podcast if you enjoy it, or share it with someone else who would enjoy it (more listeners is a critical part of the flywheel that keeps this Substack and podcast going!).

Share

Disclaimer: Nothing on this podcast or on this blog is investing or financial advice; please see our full disclaimer here. The transcript below is from a third party transcription service; it’s entirely possible there are some errors in the transcript.

Transcript for paid subs begins below (Note: in order to get these up quickly, I post an AI generated transcript alongside the podcast. A professionally edited transcript comes a few days later; I replace the AI generated transcript once the professional one is available)

Read more

Well, I think I’ve been in the top 5% of my age cohort all my life in understanding the power of incentives, and all my life I’ve underestimated it. And never a year passes but I get some surprise that pushes my limit a little farther.

I’ve written two articles around that quote (2023’s Trite Munger quotes that hit me, H1’23: Incentives rule all and 2025’s Weekend thoughts: incentives and bad corporate governance), and the “incentives rule all” is part of my fascination with the corporate “dark arts” and the driving force behind my recent posts on RELY + OPEN’s pay package and META’s YOLO options (as well as this premium write up on my favorite current dark arts set up).

However, sometimes incentives can go wrong. Today, I wanted to highlight a few examples where stock heavy packages might not be as bullish as they appear, where a comp package could actually disincentivize management from maximizing shareholder value, or (at the extreme) where a poorly designed package could encourage management to destroy shareholder value in order to maximize management’s payout.

Let’s start with the most fun example, and also the one I see the most:

• A comp scheme that could encourage management to destroy value to maximize their own payout.

Gamestop (GME) serves as a perfect example here. In January, they gave their CEO a huge option package: the CEO got >171m options struck at $20.66/share (the stock’s closing price). The options don’t expire for 10 years, and they only vest if the company hits certain market cap and EBITDA targets. The company was really proud of this award and the alignment it encourages; they put out a PR touting it and everything!

You can certainly see the logic behind the award: GME’s market cap is <$10B, and their 2026 EBITDA was ~$345m. This comp package is encouraging massive market cap and EBITDA growth in order to even begin vesting.

Corporate governance ninjas can probably already see the issue with this package: it encourages any growth in market cap and EBITDA, not per share numbers. That incentive carries a host of issues. To take it to the most extreme: the CEO could easily hit all of his targets by issuing stock like a wild man in order to boost the company’s market cap. He could then take all of that cash and go on an acquisition spree in order to drive the company’s EBITDA up. It doesn’t matter whether the acquisitions create value for shareholders; if they boost EBITDA, they help from a vesting perspective. The EBITDA metric also encourages a certain type of acquisition: buying low multiple businesses is much better for the company than buying higher multiple businesses because a low multiple means each acquisition dollar creates more EBITDA and thus gets them closer to vesting the EBITDA hurdle. It doesn’t matter if the higher multiple business is a better one that would create more shareholder value; the CEO is not incentivized by shareholder value. He’s incentivized to increase market cap and EBITDA.

Or consider this: pretend Gamestop makes an incredible acquisition or investment. Say they take $5/share and put it into Bitcoin 2.0 at $100 and it goes to $1,000. GME now has an investment worth $50/share…. but let’s say GME’s stock stays stuck around $20/share, so it’s trading at a huge discount to this awesome investment in Bitcoin 2.0. The best thing GME could do in that case would be to buyback stock as aggressively as possible….. but doing so would significantly reduce GME’s market cap even though it would significantly increase GME’s per share value.

Now, there is a limit to how far this specific example can be gamed; GME’s CEO was given options, not PSUs, so he can’t just keep issuing equity at any price in order to hit the market cap requirement as he needs the stock to be above the strike for the options to have value…. but I think you can pretty clearly see the misalignment issues he’s going to face with this structure going forward.

And, by the way, this type of misalignment is not rare; I’ll see PSUs granted all the time with market cap or particularly EBITDA or free cash flow requirements. Let me show you one of the more dangerous ones I’ve seen recently: Dollar General’s (DG) walkaway package with their CEO.

Some background: in March, DG appointed a new CEO who would take the helm in January 2027. They gave their current CEO a transition agreement to encourage him to stick with the company through the end of the year. It includes a PSU package that vests 50% based on 2026’s EBITDA and 50% based on ROIC from 2026-2028.

Why is that package so dangerous? DG is a retailer. There are really easy ways to boost near term EBITDA; for example, both marketing expenses and IT investments are expensed in the current quarter but should have benefits down the line. If you’re a CEO who’s leaving at the end of the year, won’t you pull every lever to make sure you hit your EBITDA targets and get paid this year? If it leaves the company at a deficit in the long term…. well, that’s the next guy’s problem! That’s the type of incentive that results in a CEO cutting costs to the bone and leaving the next guy to clean up a mess.

Let’s move on the next example; I’ll admit, as an investor, this one scars me the most:

• A comp package could actually disincentivize management from maximizing shareholder value.

Why does this one scare me? Because I’m so focused on incentives, and I’m always worried I’ll be lured into a situation where the incentives look positive but are actually insidious.

A live example will show this best: consider NNBR. In 2023, the stock was trading for just over $1/share, and they recruited a new CEO with a contract that would give him up to 2.5m shares if the stock price could hold $11/share:

It’s not just the CEO who could get pretty wealthy if the stock screams higher; the COO took a similar package:

Fast forward to today, and things haven’t gone that well. The stock is back down to $1.50/share (though some early strength in the stock resulted in the $2 and $3 tranches vesting), and the company is reviewing strategic alternatives. Imagine you’re the CEO and had two choices right now: sell the whole company for $3/share, or max out the company’s credit line, head to Vegas, plop down at a roulette table, and bet it all on lucky #13.

If we ignored the fact that option #2 would result in some jail time, the CEO is actually incentivized to pursue that “lever up and risk it all” option. Why? Selling the company doesn’t help him vest more units, so he’s not super incentivized to pursue a sale (particularly because it puts him out of a job). In contrast, if he got lucky with the “lever up and risk it all” strategy all those PSUs would go in the money and he’d grab a multi-million dollar windfall.

Obviously that’s a very extreme example, but it contains an interesting nugget: when a CEO has a bunch of deep out of the money grants or options, they become increasingly incentivized to take high variance bets with the company, even if those bets are hugely suboptimal for the company and negative expected value for its shareholders. Who knows how the NNBR review plays out, and there are some big shareholders that can hopefully help steer the ship there….. but it seems clear to me that a lot of the legacy incentives there are pushing strongly to a “one more YOLO” even if selling the company might make more sense for everyone except a handful of insiders….

Alright, let’s move on to the last example:

• Stock heavy packages that might not be as bullish as they appear at first blush.

I find these often happen in companies that are in distress; the company will give a key executive a super equity heavy package. If you don’t look into it, it’s easy to mistake that package for a bullish sign…. but what it actually is is the company handing out lottery tickets. They’re not actually expressing a fundamental view of the company; they know they’re screwed and they’re writing massive lottery tickets in case something wild happens.

Again, an example will highlight this nicely. Consider HAIN; in December, they promoted their interim CEO to full time. As part of that promotion, they gave her a big PSU grant upfront and explicitly stated that the big grant represented three years’ worth of grants (i.e. she would not get any grants in FY27 or FY28). HAIN’s stock was trading for just over $1/share, and the grants required the stock to get to $3-9/share within three years. At the high end, this package was worth ~$13.5m in PSUs if the stock could 5-10x inside of three years.

A CEO giving up three years of awards to take them all up front and bet on a turnaround? That’s about as bullish a signal as you can get on the surface!

But there is another way to look at that grant: what if the company is facing distress, so the CEO and board decide they might as well front load all of the grants because there’s a decent chance the company won’t be around in the ensuing years to hand out bonuses anyway?

I’d suggest there’s a decent chance that’s what’s happening at HAIN. Just two months after being appointed full time CEO, HAIN sold their better for you business for $115m in cash. While the company suggested the business hadn’t earned anything in the past twelve months, the business was historically a strong earner; a subsequent filing suggested that the business had earned ~$30M in EBIT in the twelve months ending June 2025. So HAIN sold the business for <4x a very recent EBIT number; on top of that, their financials discloses they’ll incur $7.7m in transaction fees for the sale, and a subsequent earnings call revealed ~$25m in stranded costs they’ll have to whittle away with the division sold.

Obviously I’ve been unimpressed by these results…. but it’s not just me; the market has actually traded the stock down on the news. It’s pretty rare for an overlevered company to sell a division that’s not generating any profits and see the stock go down!

It’s impossible to know the whole story from the outside… but it’s really hard to look at those numbers (plus the resulting share price!) and think anything other than “HAIN is really stressed and forced to firesale assets to try to deal with their leverage.” I’d suggest that sale was in the works when the CEO switched from interim to fulltime and that YOLO PSU package was negotiated. My guess is everyone looked around and said, “we’re screwed; no one else will take this role and step into this mess. On the off chance we survive this, here’s some generational wealth to make it worth your while.”

Odds and ends

• Pay can obviously get funky in other ways. Someone highlighted COOK’s pay to me recently, and I’d be remiss if I didn’t mention it. COOK’s financial performance for 2025 missed all of their executive team’s performance goals, resulting in their stock declining >50% during the year and “no payments under the program to the Company’s named executive officers”…. but “the Board decided to award Jeremy Andrus, the Company’s Chief Executive Officer, and Michael Joseph (Joey) Hord, the Company’s Chief Financial Officer, discretionary cash bonuses equal to $956,250 and $270,938, respectively, due to their significant contributions to the Company in 2025 and to promote retention.” Well done guys; if I was a shareholder I know I’d be thrilled with that decision!

• LCID hired a new CEO this month and gave them market cap hurdle PSUs; again, just not sure why any board would go for market cap weighted over per share. Just creates lots of opportunities for misalignment for no reason.

• One more example of PSU grants that could cause problems: PLAY gave their new CEO PSUs that vest based on SSS growth and adjusted EBITDA targets. You could think of a worse way to incentivize a CEO, but this one is pretty bad. Why? It’s near impossible for a restaurant to report negative adjusted EBITDA, so you just handed the CEO a comp package that said “go open a ton of units no matter the return on investment and you will get paid. And, if you do it quickly, those units enter the comp base while still in the honeymoon period, thus helping you hit your SSS target!” Combine them, and the CEO is incentivized to rush to open a ton of units. Yikes.

With that kind of edge, you could imagine that trading the company’s stock well would be pretty easy to do. You could buy the company’s stock any time it was too cheap…. and you could help make it too cheap by issuing pessimistic guidance or sounding down about the business. If you wanted to offload some shares, you could issue particularly bullish guidance and start selling.

Of course, what I’ve just described is the CEO of a company… and a long time ago regulators decided that they’d rather CEOs spend their time running businesses than swing trading the company’s stock all day, so insiders face a daunting set of rules and regulations that generally discourage them from day trading the company’s stock.

But there is a workaround of sorts for insiders: executives and boards often have enormous flexibility in how and when they issue stock-based compensation. If they want to get aggressive, they can use that flexibility to maximize the value of grants when the market price is badly disconnected from business reality (and perhaps make their own fortunes by using dour guidance to depress their share price in front of issuing the grant….).

My friend Mike (“Nongaap”) called this ability to create options after influencing the stock price “the corporate governance dark arts”. In volatile markets, those dark arts get even more valuable; volatility increases the value of any option, and insiders can see in real time how their business is doing and that any market driven puke in the stock is foolish and temporary.

I’ve already written two free articles on “dark arts” set ups (OPEN vs. RELY pay packages and the YOLO options at META), and I have several more posts planned for the next few weeks. However, every now and then I’ll build a “basket” of names that hit on a theme I like for the premium side, and there are 2-3 “dark arts” names that I find particularly edgy / actionable, so today I want to highlight one of those names to start the premium “dark arts” basket off:

Read more

This podcast is sponsored by Trata

I already know you’re going to like trata. Why? Because you’re reading this blog post, meaning you’re interested in this podcast. And trata is just like this podcast (though without the handsome host!). Trata is anonymized transcripts of buysiders discussing stocks they are following and what they really think will drive the stock. I’ve been mentioning it on the podcast for months, and the most frequent complaint I hear from people who check it out is they wish trata had more content on more of their stocks. Plus, if you’re interested in FISV, you can see the transcript I used to prepare for this podcast here.

Please follow the podcast on Spotify, iTunes, or most other podcast players, as well as on YouTube if you prefer video! And please be sure to rate / review the podcast if you enjoy it, or share it with someone else who would enjoy it (more listeners is a critical part of the flywheel that keeps this Substack and podcast going!).

Share

Disclaimer: Nothing on this podcast or on this blog is investing or financial advice; please see our full disclaimer here. The transcript below is from a third party transcription service; it’s entirely possible there are some errors in the transcript.

Transcript for paid subs begins below (Note: in order to get these up quickly, I post an AI generated transcript alongside the podcast. A professionally edited transcript comes a few days later; I replace the AI generated transcript once the professional one is available)

Read more

Note that I’m not the only one to notice META’s interesting options package; it’s the example people emailed me about the most over the past week on the heels of the RELY / OPEN piece. But, even with all the eyeballs that come with META being a trillion dollar company and every corporate dark arts guru picking up on these crazy out-of-the-money options, I still don’t think people realize how insanely bullish the options grant is nor do I think people appreciate what it implies about the upside META sees in its business (and, given that the upside is probably being driven by META’s AI efforts, by extension I don’t think people realize how big META is saying they think the upside to AI is).

Let me give a juicy sound bite to let you know just how damn bullish these options are: as an investor, I generally just don’t buy mega-cap companies. Too many eyeballs, too much competition…. but despite that, META’s options are so insanely bullish that I’m tempted to buy some LEAPs on META just to avoid the FOMO of missing out on the clear upside they’re showing if it actually plays out2.

Alright, tease out the way, let’s actually dive into the options. In late March, META gave basically all of their C-Suite (except for Zuck) multi-year stock options that require the stock to almost double before they’re even in the money (for example, the bottom end of the options package is struck at >$1,100/share versus a current trading price of ~$600/share!).

The company was even clear3 with the press that this package was all about the executives aggressively betting on themselves and value creation. It’s worth clipping the statement from the company on the options in full, because it’s more akin to how a meme stock tries to rile up their shareholders than a trillion dollar company talking about rewarding / incentivizing their employees:

This is a big bet. These pay packages will not be realized unless Meta achieves massive future success, benefiting all of our shareholders. As with all stock options, there is only value if the share price meaningfully exceeds the exercise price, and in this case, it must be on an exceedingly aggressive 5-year timeline

META’s “big bet” is interesting for a host of reasons. Let me start with a non-obvious interesting thing: Zuck is already plenty rich, and he famously takes a salary of $1/year with no bonuses (though META does drop >$25m/year on hiring security for him and his family); instead of getting big bonuses and salary, Zuck just benefits from his 300m+ shares of stock increasing in value, so he still gets plenty rich / upside exposure if the stock works…. but it’s still extraordinarily rare to see a bunch of top execs get some “if this stock goes parabolic, you’ll make multi-generational wealth” options and have the CEO excluded. It’s really interesting to compare Zuck’s “take nothing” approach with Elon’s “give me huge upside at every turn” approach. Both seem to be working for them (though it is kind of funny that Elon’s 2018 options package at Tesla is now worth ~Zuck’s entire stake in Facebook is worth; if Zuck was demanding huge package every few years at Facebook, what would he be worth today?).

So the CEO incentive angle is interesting…. but the most interesting thing to think about here is what it implies the team thinks about the fundamental upside if META “wins” or succeeds over the next few years. In fact, I don’t think people understand just how big or how bullish META is suggesting the upside at the company is.

Let me start with a quick table: the table below shows the different strikes that META gave their executives and the IRR required to get to those strikes before the options expire:

It doesn’t take a financial wizard to look at those IRR numbers and think, “dang, that’s bullish”…. but it’s even more bullish than you think. Why? Remember that these are options, not grants, so META’s stock needs to really work for these to have value. An option struck at $1,116/share is worth $1 if the stock closes at $1,117 the day the option expires; in contrast, a PSU that vests if the stock is trading at $1,116/share would be worth $1,117/share if that’s where the stock closes that same day.

This package would already be aggressive if it were structured as PSUs… but the fact it’s done in options suggests that META thinks they have the potential to go on some insane run that sends the stock into the stratosphere and makes these options really worth something.

Now let’s tie that bullishness into what META is saying about the potential for their business. META has ~2.5B shares outstanding. The highest end option is struck at $3,727/share (and, again, the stock needs to be much, much higher for those to be worth anything); at that price, the stock would have ~6x’d in five years and META’s market cap would be over $9 trillion.

Will the stock do that well? Probably not; the base rate of a trillion dollar company 6x’ing in five years is…. well, it’s zero, as it’s never been done before! But if you believe in corporate dark arts, then grants and options are handed out with at least some eye to them being achievable / valuable. For Meta to hand out options like these suggests insiders see at least some plausible path to a ~$10 trillion valuation on a surprisingly short timeline. What does that tell you about how they’re thinking about the AI event path and how they can monetize it? What are the odds they have an internal financial roadmap backed by the early returns from their AI investments that suggests these options have some chance of paying off big?

PS- Completely unrelated, but my friends at AlphaSense are hosting a webinar on using AI for earnings prep and analysis. It’s an area I’ve been spending a lot of time on recently and will likely have some upcoming posts on, so figured I’d highlight if of interest! You can sign up for the webinar here:

I’ve increasingly felt that way over the past year; with the market awash in volatility, I’ve seen more companies and insiders use aggressive, equity-heavy packages to capitalize on dislocated stock prices or clear inflections in value.

Today, I wanted to compare and contrast two specific examples of equity heavy packages that are clean, easy to understand, and very similar on the surface

• OPEN’s package for their new CEO in September 2025

• RELY’s package for their new CEO in February 2026

Why choose these two specific examples?

Because while any share price heavy package is interesting on its own, comparing these two shows how you can combine “the corporate dark arts” with fundamental work to separate real signals from noisy ones.

Let’s start with OPEN; in September, they hired Kaz Nejatian as their new CEO. To say Kaz is betting on OPEN stock is something of an understatement: the terms of his contract call for him to make $1/year and he is not eligible for annual bonuses.

Why would he take a package that paid him basically nothing? As part of the deal, Kaz received a bunch of performance stock units (PSUs) that vest if OPEN’s stock hits different price levels; I’ve included a table below that shows all the different levels and share vests:

That package has 7 tranches of PSUs and each tranche has just over 5.8m PSUs. At the high end, if OPEN’s stock can hold $33/share, the combined value of the tranches will be worth ~$1.4B (pre-tax). OPEN was trading for ~$5.85/share when the grants were made in early September 2025; to hit the low end of the package, the stock needed to do ~9% annualized. Again, that’s just to hit the low end of the package. The table below shows the annualized return for the stock to hit different tranches of the package at the time of the grant and at today’s share price:

On paper, this is about as good a CEO incentive package as you can get. The award is heavily tied to share price performance, which means management only really gets paid if shareholders do too. That kind of package is always worth noticing. If a board and CEO are willing to load compensation so heavily toward equity upside, it usually tells you they want maximum exposure to the stock price. And, as a little cherry on top, as part of the CEO appointment you had a new board member join and write a $5m check into OPEN alongside a respected VC fund (Khosla) writing a $35m check. That’s great alignment and a wonderful sign that sophisticated investors have bought into the vision / upside here.

Which begs the question: if the signaling and alignment at OPEN is about as good as it gets, why aren’t I personally that excited about the opportunity (read: why don’t I have a position)?

I’ll be honest: it’s because I hate the OPEN business. I just see no way it’s profitable through a whole cycle. I'll eat crow if and when proven wrong about the underlying viability of OPEN, and obviously the insiders here who are betting on the stock should be more knowledgeable than me… but I’ve always thought this business would be challenged for a host of reasons, and I don’t think any amount of management incentive can change that basic reality. I’m also a little turned off by how retail focused the company is; things like “special dividend of tradable warrants” seem designed to (try to) lure in retail shareholders and a massive distraction12.

So I think OPEN is so useful here because it helps show that “dark arts” style grants matter, but they are not sufficient on their own. You still have to marry the compensation analysis to your view of the fundamentals… and that is what makes RELY more interesting to me.

RELY is a company I’ve spent a lot of time looking at and thinking about (largely because I think highly of Mario Cibelli and he’s laid the story out so well on the podcast3); in February, they hired a new CEO and gave him a very interesting equity comp package:

RELY’s stock was trading at ~$13.60/share when they gave the CEO that package in mid-February. Just to hit the low end of that grant, the stock had to do ~8% annualized from then until 2031. To hit the high end, the stock had to do almost 30% annualized. Here’s a quick table I put together with the IRRs to vest the different tranches:

All in, the RELY set up is very similar to OPEN. You’ve got a new CEO stepping in with minimal salary (RELY’s CEO will make $350k/year, a pittance for public CEO!) with an aggressive share price schedule that requires the stock to do pretty darn well just to hit the low end and will create generational wealth if the CEO can hit the high end and deliver incredible stock performance (the high end of $50/share would be worth ~$70m to the CEO). The plan isn’t quite as aggressive as OPEN’s plan (RELY’s CEO is taking home some salary and can get bonuses; OPEN’s gets nothing but the PSUs and becomes a billionaire versus a mere ~centi-millionaire if they hit the high hend), but it’s pretty damn torqued to the stock price (RELY’s CEO is also being given ~787k RSUs to go along with those PSUs; those are worth ~$10m at market price so he should be pretty darn equity motivated even ignoring the almost nine-figures he’s got on the line if he can get the stock to hit $50!).

So the set ups are similar…. but why am I a lot more positive on the RELY grant than the OPEN one? Here’s where I think you can bring in some fundamental analysis / critical thinking to these types of “dark arts” setups.

RELY just hosted an investor day in December. The investor day included a whole bunch of fundamental stuff on RELY’s business and outlook, including this “medium-term outlook.”

RELY is a net cash company that is currently doing ~$1.6B in revenue and <$300m in EBITDA. They’re talking about growing revenue 20%+ annualized and EBITDA basically doubling in three years. The CEO’s pay package explicitly notes “the stock price range implies an increase in the Company’s estimated market capitalization up to $10.5 billion.” That valuation is <20x the 2028 EBITDA guidance; it’s absolutely not crazy to think that RELY would trade for 20x+ EBITDA if they hit that outlook and are growing that quickly.

What makes RELY especially interesting is that the company put out firm guidance targets before it hired the CEO. That timing gives the new CEO a chance to “underwrite” the stock and the guidance: he could examine the assumptions behind those targets, ask questions about the path to hitting them, and decide whether taking a heavily equity-weighted package was worth the risk. That’s why I think RELY’s package carries more signal than the average heavy incentive grant: it suggests both the board and the incoming CEO believe the path to those investor day numbers is real.

Odds and ends

• A true skeptic might think that companies are just throwing these PSUs around and treating them like funny money. I’m sure there’s a little bit of that with stock based compensation at publicly traded companies, but I believe that CEOs are going to put a lot of thought into taking a job that’s equity heavy and have reasonable confidence in an event path that will help them to hit those targets. Why? CEOs aren’t dumb when it comes to their pay package. No CEO is going to join a company and sign away five years of their life for an equity heavy package unless they feel there is a very good chance they can vest that equity. And no board wants to have a CEO join, do a great job, and then make no money because the equity package was struck at ridiculous numbers. That’s a recipe for an unhappy CEO who starts taking some weird risks or doing some weird stuff. So, at a high level, I’d contend that the CEO and board only approve these types of packages if they have a clear plan for how they get to their targets.

• As long as I’m ranting on OPEN, a quick comment: they’ve added an accountability tab where you can keep track of their weekly metrics. It’s a cool idea…. but I think it’s just very showy / can easily encourage bad behavior. The core of the tab is tracking how many contracts they get every week; that is very gameable. You could increase your contract turnover instantly by just throwing out a ton of insane bids on houses! Real turnarounds and share price growth take work; I’m not sure diluting it down to one measure for external shareholders is all that productive (and it might be counter productive!).

• My plan is to turn this post into a multi-part series over the next few weeks. Each part will break down an interesting “dark arts” style grant in a different way; if you enjoyed this post and want to see more of them, I have two requests:

  • My emails are always open for tips on interesting set ups like this; I try to track all the juicy exec comps, but the real interesting stuff happens when you can combine a juicy pay package with fundamental research and a thesis on what’s driving the bullishness.

  • It’s actually quite helpful if you hit the “like” button at the end of this article to let me know you like these types of posts / help the substack algo spread the word

This podcast is sponsored by Trata

I already know you’re going to like trata. Why? Because you’re reading this blog post, meaning you’re interested in this podcast. And trata is just like this podcast (though without the handsome host!). Trata is anonymized transcripts of buysiders discussing stocks they are following and what they really think will drive the stock. I’ve been mentioning it on the podcast for months, and the most frequent complaint I hear from people who check it out is they wish trata had more content on more of their stocks. They’ve been particular great for parsing through the recent SaaS sell off; see this free transcript on WIX for just one example.

Please follow the podcast on Spotify, iTunes, or most other podcast players, as well as on YouTube if you prefer video! And please be sure to rate / review the podcast if you enjoy it, or share it with someone else who would enjoy it (more listeners is a critical part of the flywheel that keeps this Substack and podcast going!).

Share

Disclaimer: Nothing on this podcast or on this blog is investing or financial advice; please see our full disclaimer here. The transcript below is from a third party transcription service; it’s entirely possible there are some errors in the transcript.

Transcript for paid subs begins below (Note: in order to get these up quickly, I post an AI generated transcript alongside the podcast. A professionally edited transcript comes a few days later; I replace the AI generated transcript once the professional one is available)

Read more

• I consider YAVB my “empire” with four core pieces: this blog / substack (the free side), the premium side of this blog, my podcast (also on Spotify, iTunes, or YouTube), and my twitter account. You can see my 2025 vision and goals for the empire here. If you like the blog / free site, I’d encourage you to check out the pod, follow me on twitter, and maybe even subscribe to the premium site!

• A bonus note: I get asked from lots of people about how to break into the finance industry. I’ve done an entire podcast on how to get a job in investing I’d encourage you to listen to…. but my top advice would be to go out and start a substack yourself! If you do launch a substack, please let me know so I can try to be helpful.

State of markets (Monthly recurring piece)

• It’s not a perfect indicator, but I like to use the CNN “Fear & Greed” Index just to quickly quantify where the markets are.

• In last month’s links, I noted that it was strange market as “basically every index is hovering near all time highs” despite the index reading “fear.” The market has certainly gotten no less strange this month, as the index currently sits pretty far into “extreme fear.”

• Why do I find this market strange? It’s not because we’re in “extreme fear”; since my last post, we started a war with Iran with potentially far reaching and unknown consequences. Energy prices are skyrocketing, and we seem on the brink of a true energy crisis. Those energy prices are causing inflation expectations to rise, bringing with them the prospect of going from an interest rate cutting cycle to an interest rate hiking cycle and the possibility of stagflation?

• So, no, I don’t find an extreme fear reading particularly strange given what the world look like. What I find strange is that we’re getting an extreme fear reading and I don’t really see “extreme fear” in the market.

  • As I write this, the Russell is down ~3.7% for the year. The S&P is down maybe 7.5%. Yes, both are down substantially on the month (they’re both down ~8% on the month), but we’re barely into correction territory on the Russell and not even in correction territory on the S&P. Given stocks were at all time highs coming into the current almost correction, it’s tough for me to look at these moves and square them with “extreme fear”.

  • Of course, on the other hand, I try to follow the stocks / positions of investors I know and like…. and I think this quarter has has, by far, the largest amount of “blows up” (stocks down 25%+ on earnings). So perhaps the overall index composition is masking some of the pain underneath the hood?

One article that caught my eye (monthly recurring piece)

• The threats and bare-knuckle tactics of MAGA’s Top Antitrust Fixer

• I’ve found myself in a weird state when it comes to antitrust with this administration. Honestly, I’m an anti-trust skeptic; we live in a really dynamic economy that’s rapidly evolving, and I think anti-trust historically has been blind to a lot of that evolution. Often, it was fighting yesterday’s wars (blocking office depot / staples in 2016!) or living in a fantasy (Spirit has now gone bankrupt twice since JetBlue was prohibited from buying them; given JetBlue is currently exploring a sale because they are kind of distressed, I’m sure the combination would have been a true market behemoth). So color me a huge skeptic…. but, despite that skepticism, I find the complete inconsistency of anti-trust decisions coming out of this administration to be really crazy1, and I worry that letting any merger through if the buyers can cozy up to the right people and hire the right lobbyists is going to create some very negative long term consequences / results in a very, very brittle economy going forward.

  • Note that I say this about anti-trust, but I think the same could be said a whole host of regulations in this administration where relationships and patronage seem to tilt the playing field towards a select group of partners. Great for those companies (and their shareholders) in the short run; potentially ruinous for the economy as a whole in the long run.

• Anyway, aside from that rant, I post this article for two reasons

  • It is a really wild / gossipy article that is a lot of fun to read, and you don’t get that combo much in antitrust!

  • I’ve been hearing for months from people who are better at antitrust than me that the most important thing in buying deals is analyzing the companies’ lobbying strategy / who they have working for and against them. I absolutely did not pay enough attention to those tips (which is one reason among many why those people are better than me at antitrust!)

Nerd Corner (Monthly recurring piece)

• There’s no hiding it; I’m a massive nerd. I read 3-4 fantasy books a month, my favorite pastime is playing board games with my wife and friends, and I was an eager supporter of the Brandon Sanderson (original) Kickstarter (yes, I splurged and went for the hardcover books).

  • I didn’t support Sanderson’s DND-style board game…. but only because my wife would murder me if I bought another board game when I have a whole Dungeon Master kit collecting dust. Still, I wanted to highlight it because between the two Kickstarters Sanderson will have raised >$50m for new projects; if you’re a fan of fantasy and that type of fan enthusiasm doesn’t encourage you to give him a try, I don’t know what will! As I mention below, if you’re trying him out, I’d probably start with Mistborn, though Tess and the Emerald Sea is basically a standalone book and might be my favorite book he’s written

• I’m about halfway through Guards! Guards! It’s book 8 (out of 40+) in the Discworld series2. Some of the prose is absolutely top notch and the characters are pretty interesting…. but I will say the downside of having standalone books is it doesn’t have that multi-series mystery / plot reveal that I love in fantasy books. So I’ll finish and give a review next month…. but I’ll probably be returning to my standard fare after this!

• PS- outside of my monthly recs, I constantly get asked what my favorite fantasy books are. So I’m just going to throw this list out monthly:

  • Anything Brandon Sanderson writes; he’s by far the best fantasy author out there. I’d probably start with Mistborn, though Tess and the Emerald Sea is basically a standalone book and might be my favorite book he’s written. The Frugal Wizard’s Handbook for Surviving Medieval England is also a standalone book and a very fun and fast read. Most of his works are interconnected through something called “the cosmere;” if you’re feeling crazy, here’s how to read the cosmere in order.

  • Kingkiller is probably the best series I’ve ever read; waiting for the third is agony.

  • Gentleman Bastards is right up there with Kingkiller; the mix of fun and world building is outstanding.

  • Red Rising series is more sci-fi, but my god is it good. I would literally stay up all night to read every book the day they came out (note: I’ve only read the first trilogy; I’m going to read the second when the last book comes out later this year).

  • If you’re looking for something a little more under the radar (most of the books above are widely regarded as some of the best fantasy books / series ever), the Licanius Trilogy was fantastic.

  • First Law trilogy is excellent. It can get a little brutal / graphic though; there are a bunch of sequels and spins, but I’ve never been able to finish them because one of them got so brutal I just put the book down and never picked it up again. But the first trilogy is really, really great.

  • The Cradle series probably isn’t as “good” as the books above, but I binged them and every fantasy fan I’ve recommended them to has said something along the line of “I read all ten books in two months after I opened the first one.”

    • I’ve also really enjoyed that author’s newest series, Last Horizon!

  • The Wandering Inn series isn’t for everyone, and the first ~150 pages of the first book need to get powered through…. but, if you can power through them, the world building here is incredible, and I’ve had so many friends get hooked by this series. If you like hard fantasy, I can near guarantee you’ll like it.

  • Similarly, Dungeon Crawler Carl won’t be for everyone, but it’s probably the most fun series of books I’ve ever read, and some of the scenes in the later books carry a surprising amount of emotional weight.

    • I’ve been pitching it for months (hate to say I was early, but….), but it’s not just me! It’s so popular it got an NYT piece describing it as a “global blockbuster” in 2025.

  • The Silvers Epic (Flight of the Silvers, Song of the Orphans, War of the Givens) is more sci-fi than fantasy, but it’s one of my favorite series I’ve ever read and I think is wildly creative in how they use time travel / multiverse as a plot point (the last book was a little slow, but the ending wrapped everything up beautifully / it got a little dusty in the room I was reading).

Second, please remember you can always reach out to me if you have questions or want to swap thoughts on any…

Read more