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When the COVID-19 pandemic emerged, Shopify Inc.’s stock soared as businesses scurrying to shift operations online turned to the e-commerce giant.

But roughly two years later, the restrictions that kept people at home and shopping online have lifted and online growth has slowed as consumers curb spending amid almost 40-year high inflation and return to brick-and-mortar stores.

For Ottawa-based Shopify’s stock price, that’s meant a roughly 80 per cent drop from its late 2021 peak of $222.87 — a tough reality for many of the company’s equity-holding staff to face.

“If you’re in your early 20s and you’ve never been in a startup before, on paper, it was like ‘Wow, I can buy a cottage,’ and then all of a sudden that’s gone in a period of months, that can really be head-spinning,” said Chris Albinson, chief executive at Waterloo, Ont. innovation hub Communitech.

That shift is playing out across the globe as investor exuberance around tech stocks fades, sinking valuations.

In response, scores of tech companies including Shopify, Netflix, Wealthsimple and Clearco have slashed workforces and prepared staff for a new era of frugality meant to ward off the impacts of a potential recession.

The transition has been jarring for tech workers who grew accustomed to watching the value of their equity rise and their company hiring, funding lavish retreats and offering office perks like catered lunches and foosball tables.

“A year ago, you might have been able to to attract somebody with a lower base salary and a higher equity package. I don’t think that’s the case anymore,” said Natalie Romero, who worked at Shopify for four years before being laid off along with roughly 1,000 colleagues in July.

“I just don’t think (equity) has the same allure it once did.”

Shopify appears to have realized this. Its new “total rewards system” that allows staff to choose between cash and stock options for their compensation will take effect on Sept. 1, spokesperson Jackie Warren said in an email.

Other firms seem poised to follow suit.

A study of 408 global companies commissioned by Morgan Stanley at Work in September 2021 found 46 per cent of Canadian firms studied were considering expanding equity to a wider range of employees and 42 per cent were debating awarding equity to staff based on individual performance.

One-quarter were considering providing lookbacks — allowing staff to later purchase stock at the lower of its offering period or end of purchase period — and discounts for employee stock purchase programs.

Think Research has been considering changing its stock option policy for more than a year because chief executive Sachin Aggarwal feels changes will help the Toronto clinical data company “better defend its marketplace”

“What you do with equity is really impacted by what’s going on in the marketplace broadly, and that means not just the stock market and how stocks are performing, but also ... what other tech companies are doing,” he said.

Household names like Google and Amazon are so ubiquitous they can pay larger salaries to fetch and retain talent. That kind of cash might not be available at smaller companies like Think Research, so these firms use equity compensation to attract top workers.

But when the market shifts, that sell can be harder.

“When your share price is improving, the perception of your equity tends to improve ... and when your share price is declining, the perception or the value of your shares tends to decline among your skilled workers,” Aggarwal said.

The shift in perspective can be most extreme at companies that were raising capital at “nosebleed” rates over the last two years and have since seen their valuations decline, said Nic Beique, founder of Calgary payments company Helcim.

Swedish “buy now, pay later” darling Klarna, for example, raised US$800 million earlier this month at a valuation of US$6.7 billion, down around 85 per cent from its US$46 billion valuation last year.

In Canada, a similar story played out for finance company Wealthsimple. Its valuation reached $5 billion last year, when it raised $750 million from a star-studded list of investors including rapper Drake and actors Ryan Reynolds and Michael J. Fox.

Now, the firm controlled by Power Corp. of Canada has seen the holding company drop its valuation of its 24 per cent stake in Wealthsimple to $492 million, down almost 50 per cent from $925 million in March.

“Investors were investing in late-stage companies as if they’re growing at the same pace as an early-stage company, which was probably unrealistic, in hindsight,” said Beique.

“We’re really seeing a lot of contraction and revaluation and that’s forcing companies to relook at their equity programs and redo all their valuations or metrics.”

But equity isn’t everything.

Of the companies Morgan Stanley at Work surveyed that indicated their current equity compensation plan was not successful in talent acquisition or retention, 55 per cent reported employees leaving for opportunities with other benefits irrespective of equity offered.

“Every individual is different,” said Albinson.

“But if they don’t like what they’re working on or if they don’t like the people they’re working with, you can do everything you want on compensation, they’re going to leave eventually.”

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