Coinbase and Robinhood are massively diluting investors by issuing more stock to retain employees as their shares lose value in a plunging market

• Lower stock prices have forced companies to issue more restricted-stock units.
• Firms like Robinhood and Coinbase are issuing more shares to match previous compensation packages.
• Issuing more shares dilutes the value for existing shareholders, a report from JPMorgan said.

Companies like Robinhood and Coinbase are heavily relying on issuing more stock to woo new employees now that a plunging stock market has lowered the value of these shares — but JPMorgan analysts said this practice could negatively impact existing shareholders.

To keep pace with employee-compensation packages and to match previous ones, companies will issue extra shares. This practice significantly dilutes the value for existing shareholders once the shares vest, and dilution will likely continue in the coming years, Kenneth Worthington and Michael Cho, two JPMorgan analysts, said in a July report.

Robinhood and Coinbase can fix this by reducing compensation or paying more cash, the analysts said, but they cautioned that each method could cause other issues for the company, such as a loss of talent or a strain on company cashflow.