Nubank founder cancels variable compensation program that could give him US$ 423 million

Nubank said this Tuesday (29) that the founder and chief executive, David Vélez, decided to end an agreement that gave him the right to a possible extra millionaire remuneration in shares in the future, generating a positive accounting effect for the digital bank.

Additional remuneration was at the center of a controversy that hit Nubank in April of this year, when the bank informed the market of a total payment forecast of up to R$816 million to directors and directors in 2022, generating discussions on social networks. More than 80% of the amount referred to the accounting effects of the Vélez agreement.

Vélez’s decision also comes after the drop in the value of Nubank’s shares before the IPO. The remuneration was based on the performance of the bank’s shares on the Stock Exchange.

The long-term incentive award called CSA (Contingent Share Award) was established in 2021, before an IPO (initial public offering of shares) of Nubank in New York. According to its terms, Vélez would earn 1% of the total shares if the bank’s Class A shares remained, on average, at US$ 18.69 on the stock exchange for 60 consecutive days, and would be entitled to an additional 1% if the same occurred in US $35.30.

It turns out that Nubank shares, which started at US$ 9 each in the IPO and reached US$ 12.24 at the opening, closed on Monday at US$ 4.22. That is, they would have to raise more than four and eight times, respectively, for the activation of the payment.

Nubank estimated the fair value of the remuneration at US$ 423 million, a calculation that, among other specifics, is based on figures from the time of the agreement. In practice, the value received by Vélez would be higher, as it would imply a higher valuation of the company.

Asked whether the drop in shares was a factor in forgoing potential compensation, Velez told Reuters the program was “very misunderstood by the market” at the start of the year as it was “very, very ambitious”. So the decision to forgo the payout has “nothing to do with the stock’s short-term performance,” he said.

If the first objective were achieved, based on the current share capital, Nubank would be worth approximately US$ 86.7 billion on the stock market, against approximately US$ 20 billion currently. Latin American giants like Vale and Mercado Livre have market caps of around US$69 billion and US$46 billion, respectively.

Vélez, who had already pledged to donate any shares he earned from the extra compensation to his family’s philanthropic platform, said the decision was based on the current macroeconomic scenario of high interest rates.

“I came to the conclusion that the best thing for the company at this point is to cancel this, given how expensive the program is for the company,” said Vélez. “It allows us to navigate a more turbulent environment with much less weight and in a more agile way,” he added.