Axon (NASDAQ: AXON) CEO Patrick Smith shares some similarities with You’re here (NASDAQ: TSLA) founder Elon Musk, including his compensation package and business acumen, which have paid off for Smith and the company so far.
In this segment of “Industry Focus” on Motley Fool Live, registered on December 1Fool contributors Emily Flippen and Brian Stoffel discuss Smith and his future role with Axon.
10 stocks we prefer over Axon Enterprise
When our award-winning team of analysts have stock advice, it can pay off to listen. After all, the newsletter they’ve been running for over a decade, Motley Fool Equity Advisor, has tripled the market. *
They just revealed what they think are the top ten stocks investors can buy right now … and Axon Enterprise was not one of them! That’s right – they think these 10 stocks are even better buys.
See the 10 actions
* The portfolio advisor returns on November 10, 2021
Emily Flippen: One thing I think is worth noting. I’ve always found that to be an interesting aspect of this business, and I’m curious to hear what you think about it, and that’s the founding CEO compensation.
Several years ago, Smith chose not to receive a salary-based paycheck and instead be paid based on the company’s market capitalization. Now there were a lot of rules in place. Obviously, Axon couldn’t acquire a very large company to artificially inflate market capitalization. So it’s a watered down version. But the general thesis was that Smith said, “Hey, I think Axon will be a much bigger company in the future and I want to prove it and I want to put my money where I say it.”
So, as the notches in market capitalization rose, Smith’s compensation was mostly stock-based, and that peaked at around $ 15 billion. Earlier in November, we saw Axon have a pretty stellar quarter. The stock price climbed above $ 15 billion before market launch and fell back after market launch. It is around 12-13 today. But I wonder what happens to Smith’s compensation once Axon gets that $ 15 billion and stays there for a bit?
Brian Stoffel: When I think about it, this is what I think about. Patrick Smith, if you’re listening, I love what your company has done, I think it’s so important, so don’t be offended by that. But in our notes that we wrote he can be a little crazy. But he truly believes in this mission to eradicate the bullet.
I remember something Morgan Housel said. Morgan was writing about Elon Musk. Morgan said you can’t get someone who is willing to break all the rules to speed up our transition to sustainable energy because someone trying to do that has to be a little crazy because you don’t. not arrive by following all the rules. But, you are also going to have the downside of going crazy having someone focus like that. We have seen this happen over the past 10 years. He’s accomplished a lot more than anyone thought he could, and we’ve seen what this madman can look like.
Now the only reason I’m bringing this up is to say that I believe Smith has a part of this too. I think he really believes he presented a vision for what the police can look like by 2030, and it’s very different from what we unfortunately have to see in the news these days.
I think Axon can be a huge force for good in this regard, in the same way Tesla is. The connection between the two is that Smith’s compensation package was modeled exactly on Musk’s. In fact, the Axon board, when they announced how this was going to be done, explicitly said that we were modeling this after Elon Musk’s package.
All that to say that he could stick around, maybe not. I would be surprised if he left because just in my bones I feel like it means a lot to him and he wants to be there to make it happen. I wouldn’t be surprised to see a new form of compensation that is also tied to meeting certain goals until 2030. This is just a guess. Obviously, I don’t know this gentleman personally at all, but he is very passionate about the fact that the police will be very different by 2030.
Brian Stoffel owns Axon Enterprise and Tesla. Emily Flippen has no position in the stocks mentioned. The Motley Fool owns and recommends Axon Enterprise and Tesla. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.