Amazon Employees Will Be Able to Use Stock as Collateral for Home Loans

By Dana Mattioli, The Wall Street Journal

Original Article Published by The Wall Street Journal

Amazon.com Inc. employees will soon be able to use their company shares as collateral when buying homes, under an arrangement with online mortgage lender Better.com.

A new Better.com product, Equity Unlocker, will allow employees to pledge stock for loans for down payments, the companies said, rather than having to sell the stock to raise cash.

To protect itself from a continued slide in Amazon’s stock price, Better.com will charge a higher rate on the mortgages of employees pledging stock — between 0.25 and 2.5 percentage points above the market rate, depending on how the down payment is structured, the company said. 

However, unlike in stock-based loans that carry the risk of margin calls, requiring borrowers put up more collateral or sell assets to reduce debts, Amazon employees’ loan arrangements would be protected if the stock price slides, Better.com Chief Executive Vishal Garg said in an interview.

AMAZON STOCK DROP HAS WORKERS FACING PAY SQUEEZE

The plan, which doesn’t involve any financial agreement between the companies, is designed to give flexibility to a workforce paid largely in company stock. Amazon historically has given less cash compensation to employees than its big-tech peers, and tried to make up the difference with restricted stock units — shares given to employees that vest over several years. 

The longer employees stay with Amazon, the more their compensation can depend on these stock awards, with shares making up more than half of total income for some executives. Last year, amid a tight labor market and a slumping stock price, Amazon raised the cap for the cash component of salaries to $350,000 from $160,000.

The stock-based compensation was predicated on the assumption that Amazon’s stock would rise at least 15% each year, a mark it had been beating until recently. But over the past year Amazon’s share price is down more than 35%, dropping compensation below internal targets, the Journal has reported.

As a result, Amazon is guiding its employees to "think like owners" and hold the stock longer to experience an increase in the price, according to statements from spokespeople and training documents viewed by The Wall Street Journal.