The NextDC Ltd (ASX: NXT) share price has dropped like a sack of potatoes over the past 12 months.
The data centre operator's share price has plunged about 17% from around $17 a year ago to its current price of about $13.86.
Still, it seems NextDC CEO and managing director Craig Scroggie sees opportunity in the company's outlook.
But the company reckons its future prosperity could be hampered if key leaders leave, lured by promises of even bigger paychecks offered by competitors operating in the data centre space, such as Megaport Ltd (ASX: MP1), Goodman Group (ASX: GMG), or Macquarie Technology Group Ltd. (ASX: MAQ).
Indeed, some NextDC execs may be inspired by NextDC founding member Robin Kuda, who forged his own path and founded data centre operator AirTrunk in 2015.
Kuda's endeavours paid off in a big way last year when US private equity firm Blackstone acquired AirTrunk in a deal worth more than $20 billion.
To prevent more execs leaving NextDC, the company announced a $150 million "Growth Incentive Plan."
To fully realise the fruits of that plan, the leadership team will need to more than double the company's share price over the next five years.
If they achieve that goal, Mr Scroggie will be the biggest beneficiary of the incentive plan and collect a $50 million bonus, while the remaining $100 million will be carved up among the rest of the leadership team.
The lucrative growth incentive plan was announced on the same day NextDC released its half-year results, which came in largely in line with expectations, reaffirming a solid contracts pipeline and with revenue up 13% to $167.8 million for the six months ended 31 December.
But it seems the market didn't react positively to the news coming out of NextDC, with the company's share price shedding 5% on the back of the announcements.
Image source: Getty Images
Did the "Growth Incentive Plan" backfire?
A $150-million bonus scheme does seem a bit much, particularly when stacked up against an announcement of revenue of $167.8 million.
NextDC will undoubtedly need to ensure the retention of key leaders in a highly competitive space.
But the timing of the announcement, with the share price down 20% over the past year, unsettles me even more than the $150-million figure.
Regardless, I'm backing Scroggie and the NextDC team.
And that's not because of the $150-million carrot dangling in front of NextDC's leadership team.
It's because the shift to the cloud continues, and NextDC is well-placed to capitalise on that shift.
If the leadership team remains focused, I believe they can achieve their goals.
If it takes an extra $150 million to make that happen, to see shareholders double their money, perhaps it will prove to be a prudent move.
