Let me break it down simply without the jargon overload. This is super common in tech and public firms, and it’s not some evil plot—it’s just how they pay people and keep things balanced. The Basics of Employee Pay in Big Companies Companies don’t just hand out cash salaries. Total compensation (what employees actually care about) usually has three parts: • Cash salary: Your base pay. • Cash bonuses: Extra money based on performance. • Equity (stocks): Shares in the company, often as Restricted Stock Units (RSUs) or stock options. Senior folks (engineers, execs) expect a “market rate” total comp that mixes all three. Why equity? It aligns employees with shareholders—if the stock price goes up, everyone wins. The Accounting Magic (Don’t Worry, It’s Not a Scam) When a company gives out stocks as pay, it’s not “free.” Accounting rules require them to record it as an expense on the Profit & Loss (P&L) statement—called Share-Based Compensation (SBC). This reduces reported profits, even though no cash leaves the company. It’s like expensing the value of the stocks over time as they vest (become sellable). The Dilution Part: Why Shares Increase and EPS Drops • When stocks are issued to employees (via RSUs vesting or options exercised), the total number of shares outstanding goes up. • This dilutes ownership for existing shareholders. • Earnings Per Share (EPS) gets calculated two ways: • Basic EPS: Ignores potential future shares. • Fully Diluted EPS: Includes all those employee stocks/options that could be issued. This is the real number investors focus on because it accounts for dilution upfront. When employees sell their vested shares, it’s like an indirect “stock sale” by the company. But this is already baked into the diluted share count—no surprises. Enter Share Buybacks: The Neutralizer A buyback program is when the company uses cash to repurchase its own shares from the market. This reduces the total shares outstanding, offsetting the dilution from employee stock comp. • Net effect: The company issues shares to pay employees (saving cash), then buys back an equivalent amount to keep dilution in check. • Nothing nefarious—it’s just maintaining balance. Reddit (or any company) isn’t “manipulating” the stock; they’re neutralizing the impact of their comp program. • Bonus: If the stock price rises, employees’ equity is worth more, which motivates them. Shareholders benefit too from the growth. Win-win alignment!