Brian Armstrong on track for $3.4B payday as Coinbase goes public

This is a shopping card full of riches representing Brian Armstrong's epic company stock compensation package.

Coinbase recently disclosed its shiny chief exec Brian Armstrong is in line to unlock an even shinier compensation package potentially worth $3.7 billion.

That is a big number. Bloomberg calculated it equates to Armstrong earning $1 million every working day for the next 10 years.

The windfall would even put Armstrong on Bloomberg’s billionaire index, which tracks the richest 500 people in the world.

Armstrong’s prize comes in the form of stock options with a 10-year expiry, which are common in tech. They give a decade to both unlock and buy nearly 9.3 million Coinbase shares for dirt cheap.

But there’s a strong chance that Armstrong could earn the entire package within the year — potentially netting him up to $3.5 billion in quick profits shortly after.

Armstrong already on track for four targets

Coinbase awarded Armstrong the right to purchase blocks of company shares for $23.46 each in August last year.

The shares are divided into six tranches, each with their own share price targets set at $40 intervals (from $200 to $400).

Armstrong can unlock each tranche by steering Coinbase towards those targets, which must be sustained for 60 consecutive trading days.

Potential profit relates to the value generated by selling each tranche of shares at their target price, which must be held for 60 consecutive trading days.

The thing is, Coinbase stock was worth about $29 per share when the company granted Armstrong the package in August.

From there, Coinbase stock would need to grow at least 600% for Armstrong to unlock the first tranche, and nearly 1,300% to receive the full thing.

Coinbase stock in March 2021 is a very different story.

Varied reports of Coinbase’s valuation have surfaced over the past few weeks, however Reuters this week noted the exchange had disclosed a weighted average share price of $343.58 in this year’s first quarter.

If Coinbase manages to simply maintain its current share price for 60 consecutive trading days after its direct listing later this month, Armstrong would’ve already unlocked nearly 75% of his compensation package less than one year after receiving it.

Coinbase stipulates that Armstrong must hold the shares for at least one year before selling them, which makes determining profit difficult.

But even if Coinbase stock traded evenly for that year, Armstrong would be in line to acquire nearly $2.2 billion worth of company shares for just $160.5 million — representing over $2 billion in potential profit.

Best case scenario?

Using Coinbase’s weighted average share price of $343.58, let’s say the company’s stock rallies 16% after going public to hit $400 per share (the final target).

If Coinbase retains that mark over the next 60 trading days, Armstrong could buy the full 9.3 million company shares for just $218 million.

For anyone who isn’t Armstrong, 9.3 million Coinbase shares at $400 a pop would cost over $3.7 billion — meaning Armstrong would stand to profit $3.5 billion if Coinbase maintained that price over the next year.

And so, Armstrong’s compensation package is reminiscent of Elon Musk’s, albeit much smaller.

Instead of share prices, Musk earns the right to buy cheap Tesla stock after the company maintains certain market values for a six-month period and achieves predetermined sales and EBITDA targets.

Fortune recently worked out Musk stands to profit over $50 billion once he unlocks the full thing — dwarfing Armstrong’s $3.5 billion significantly.