Alongside the general tightness in the U.S. labor market, issues around options and share-based awards are having an effect on recruitment in the sector and driving up the cost of new hires.
Notable among the recent disclosures was the news that DraftKings had given away a massive $683m in stock-based compensation in 2021. While a large proportion of that goes to the very top executives such as CEO and founder Jason Robins, it still leaves a sizable sum to be dispersed among the rest of the company’s circa 3,400 staff.
Robert Gray, a Las Vegas-based recruitment leader for specialist iGaming recruitment firm Pentasia, points out that when it comes to speaking to potential hires, the conversation around stock-based compensation “is one I have every day.”
But he warns that the understanding among the individuals of the value and worth of their options is less than might be hoped.
Notably, given that many people with experience in global sports betting and gaming have moved to take up posts in the U.S., the central idea of having stock-based compensation as part of the general pay and benefits package “is not something that is as common in Europe.”
A culture of options
As a story in the UK’s Financial Times put it in February this year, it will come as no surprise that stock-based compensation is seen as being one of the perks of working with companies in the tech sector.
It is often seen as a function of the startup culture; a growing tech company will hand out options in lieu of higher wages in order to entice the top talent. Such is the dearth of talent within sports betting and iGaming that a similar dynamic is now very much a part of the sector’s development as well.
“Stock options or RSU’s are very prevalent right now,” Gray said during an interview with Wagers.com. “They are so much a part of the work culture generally, especially the tech sector, and that has definitely transferred to the companies we are dealing with.”
Within the North American betting and gaming sector the prevalence is for “much stronger packages” than are available, for instance, in Europe.
“You get base salary, a bonus, stock options, full healthcare and a 401k,” Gray said.
Not reading the small print
But if candidates are aware of the potential for being offered stock options, there is less understanding of what they might mean and how they might affect future career moves. Gray said that candidates don’t pay enough attention to issues such as vesting periods or even follow the share price.
“I have conversations with people from within the companies who don’t understand the actual value of their shares,” Gray said.
This is crucial when it comes to the potential for taking up offers from rival companies within the sector. Whether the company making the offer will have either straight-up equity or options as part of their competing package will depend on the size of the company and what stage of maturity it has reached.
“Sometimes how this happens is that people can walk out of a stock-options package with one company and walk straight into a new package with another firm,” Gray said. “But that is more common for very senior roles.”
Job candidates and stock options
The obvious aim of a stock option package is that it works as a long-term incentive for both the candidates and the company.
It should be a win/win; the company secures the services of a motivated employee and the employee works that much harder in making the company a success. Both are rewarded when the stocks are on the rise and thus a virtuous circle is formed.
But what happens when the share price is on the slide and that virtuous circle goes into reverse?
The tech world has seen something of this since the turn of the year and workers at the likes of Meta and PayPal have seen the value of their options tank as investors have taken fright at the general outlook for stocks. Within the sports betting and gaming sector, the obvious example – once again – is DraftKings which has seen a 70% decline in the value of its stock.
Meaning that its staff, many of whom will be hooked up with options that are currently underwater. When what is meant to be a retention tool turns out to be anything but, where does it leave those who might be looking for a new challenge elsewhere?
A rapidly changing market
While he is unwilling to speculate on the specifics of what might be happening within DraftKings, Gray said that his firm is increasingly offering advice to candidates on the issues they should be considering.
“The market is changing so rapidly,” Gray said. “We talk to them about what is suitable, what the current state of the market looks like and what kind of offers we are seeing come through. There are a lot of moving parts, and the stock options are only one element, albeit a very important one.”
Of course, the job is made all the harder by the speed of developments within the market. The current state of flux attaching itself to a number of operators – Churchill Downs, WynnBet and Bally Bet spring to mind – adds just another layer of complication for candidates.
But Gray says that when it comes to discriminating between winners and losers, he thinks there is “not much of that yet.”
“But U.S. candidates tend to go for more stable opportunities in the first place,” Gray said. “They want to work for the larger corporations.”
Larger corporations, yes, but also with rising share prices, perhaps. That might be a trickier proposition for a while.
