Snapchat operator Snap (NYSE:SNAP) just reported a massive $2.2 billion net loss for the first quarter. Of that, $2 billion was directly related to stock-based compensation (SBC) expenses that were recognized during the quarter in connection with the company’s IPO. That total was greater than the $1.7 billion in IPO-related SBC expenses Snap had originally predicted in its prospectus. The IPO met performance conditions on previously awarded RSU grants, triggering recognition of SBC expenses, which is not uncommon.

However, it’s worth pointing out that a disproportionate amount of those costs are directly tied to one person: CEO Evan Spiegel.

Snapchat logo
Image source: Snap.

Cashed out some shares? Here’s some more!

You may recall that immediately after its IPO, Snap awarded Spiegel with a massive bonus for taking the company public, a process that inevitably entailed him cashing out nearly $300 million in stock. The young CEO was given roughly 37.4 million shares, or about 3% of shares outstanding, more than replacing the 16 million shares he sold in the IPO. The bonus was valued at $800 million based on Snap share prices at the time.

Giving a CEO or founder a bonus for taking a company public is also not uncommon at face value, but Spiegel’s award was strange for other reasons. For starters, the award vested immediately and as such comes with no requirement that Spiegel stay with the company. The shares vested immediately, but Snap will deliver these shares to Spiegel in quarterly installments over the next three years, although it has recognized the related SBC cost now.

This was all disclosed in the prospectus:

The CEO award will vest immediately on the closing of the initial public offering and such shares will be delivered to the CEO in equal quarterly installments over three years beginning in the third full calendar quarter following the initial public offering. There is no continuing service requirement of the CEO following the closing of the initial public offering. Accordingly, such shares will be delivered in…