Capital One has agreed to pay $1.9 billion in a deal that could result in the company paying the company a whopping $1 billion in bonus compensation in 2018.
According to the agreement, which is subject to approval by the SEC, the bank will receive an additional $300 million in cash bonuses, and Capital One CEO and chairman David Smith will receive $1 million in total stock options for the next three years.
Under the terms of the deal, the company will pay Smith an additional 3.75% of Capital One’s 2017 consolidated earnings per share to offset the additional bonus paid to Smith.
The bonuses are contingent upon Capital One achieving the financial metrics that Smith has described as “the most aggressive and profitable capital growth plan in history.”
The $1-billion in cash bonus payments will be distributed by the company to shareholders via the share repurchase program.
Under this program, Capital One shareholders will be able to buy shares of Capital Stock through a stock exchange-traded fund (ETF) at the target price of $15 per share, which represents an average price of Capital First’s stock at the time of the initial public offering in February of 2017.
The share repurchases will be made through an electronic program, with the first three shares sold on the NYSE under the ticker symbol “CAPG.”
Shares are then sold on an as-is basis at a discounted price per share.
The initial public offerings of Capital 1 and Capital First have seen a significant increase in the share price.
Under Capital One, the share buybacks will be funded through a combination of a combination credit line from the company’s revolving credit facility (CRF), and interest rate-free loans.
Capital One stated in its announcement that it is committed to the capital structure of the bank, which it says will allow it to support its business operations and generate returns.
Capital One CEO David Smith.
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