MultiSensor AI Holdings, Inc. Stock Compensation Disclosure
Note 10 — Share-Based Compensation
Stock Options
On October 9, 2020, the Company implemented the 2020 Equity Incentive Plan, pursuant to which the Company’s Board of Directors may grant stock options to employees and non-employees. Stock options could be granted under the Plan with an exercise price equal to the share’s fair value at the grant date. On December 19, 2023, the Business Combination triggered accelerated vesting of
all outstanding stock options. The options expire ten years after issuance. Total share-based compensation expense related to stock options recognized in selling, general and administrative expenses in 2023 was $1,197.
The grant date fair value of each option award is estimated on the date of grant using the Black-Scholes- Merton option-pricing model based on the following weighted average assumptions:
| 2023 |
| ||
Valuation assumptions: | ||||
Exercise price per share* | $ | 7.27 | ||
Expected term (in years) |
| 6.0 | ||
Expected share volatility |
| 39.14 | % | |
Expected dividend yield |
| — | ||
Risk free rate |
| 4.12 | % | |
*Adjusted for the Exchange Ratio as a result of the Business Combination.
During the twelve-months ended December 31, 2024, no option awards were granted and 182,006 option awards were forfeited. As of December 31, 2024, 938,180 option awards remained outstanding with a weighted average exercise price of $6.62.
Restricted Stock Units
In December 2023, the Company granted 1,886,166 Transaction RSU Awards to certain employees. These RSUs were assigned a fair value of $6.82, which is based on the fair value of the Company’s common stock on the date of the grant. In April 2024, the Company granted 1,382,909 Transaction RSU Awards to certain employees upon the effectiveness of the Form S-8. These RSUs were assigned a fair value of $2.26, which is based on the fair value of the Company’s common stock on the date of the grant. Each Transaction RSU Award is to be settled in substantially equal monthly installments starting on the date following the first anniversary of the closing of the Business Combination. In December 2024, the Company settled 100,433 shares net of 171,990 shares withheld to cover taxes.
In August 2024, the Company granted 150,000 restricted stock units at a weighted average price of $2.17, which was based on the fair value of the Company’s common stock on the date of the grant.
The following table summarizes the Company’s RSU activity during the year ended December 31, 2024 and 2023
|
| Weighted | |||
Number | Average Grant | ||||
| of shares |
| Date Fair Value | ||
Non-vested at January 1, 2023 |
| — | $ | — | |
Granted |
| 1,886,166 |
| 6.82 | |
Vested |
| — |
| — | |
Forfeited |
| — |
| — | |
Expired |
| — |
| — | |
Nonvested at December 31, 2023 |
| 1,886,166 | $ | 6.82 | |
Granted | 1,634,468 |
| 2.25 | ||
Vested | (3,370,634) |
| 4.81 | ||
Forfeited | — |
| — | ||
Expired | — |
| — | ||
Nonvested at December 31, 2024 | 150,000 | $ | 2.17 | ||
The Company recognized total share-based compensation expense related to RSUs of $3,161 and $12,864 for the twelve-month periods ended December 31, 2024 and 2023, respectively, under Share-based compensation expense on the Condensed Consolidated Statements of Operations.
Equity Grants
During the twelve-month period ended December 31, 2024, the Company granted non-employee directors a total of 101,559 shares at a weighted average price of $2.18. The fair value was based on the Company’s common stock on the date of the grants. The
Company recognized a total share-based compensation expense related to Board of Directors equity grants of $221 for the twelve-month period ended December 31, 2024 under Share-based compensation expense on the Consolidated Statements of Operations.
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About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.