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Compensation | 9 Months Ended
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Sep. 30, 2023
Share-Based Payment Arrangement [Abstract] |
Compensation | Compensation The Compensation Committee may grant various equity-based awards, including RSUs, restricted stock, stock options, LPUs and shares of BGC Class A common stock. Upon vesting of RSUs, issuance of restricted stock, exercise of stock options and redemption/exchange of LPUs, the Company generally issues new shares of BGC Class A common stock. On November 22, 2021, at the annual meeting of stockholders, the stockholders approved amendments to the BGC Partners Equity Plan to increase from 400.0 million to 500.0 million the aggregate number of shares of BGC Class A common stock that may be delivered or cash-settled pursuant to awards granted during the life of the Equity Plan. In connection with the Corporate Conversion on July 1, 2023, BGC Group assumed and adopted the BGC Partners Equity Plan, as amended and restated as the BGC Group Equity Plan. The BGC Group Equity Plan provides for a maximum of 600.0 million shares of BGC Class A common stock that may be delivered or cash settled pursuant to the exercise or settlement of awards granted under the plan. As of September 30, 2023, the limit on the aggregate number of shares authorized to be delivered allowed for the grant of future awards relating to 487.3 million shares. In connection with the Corporate Conversion, on June 30, 2023, the Company issued 22.5 million RSUs for the redemption of 16.9 million non-exchangeable LPUs and 5.6 million non-exchangeable FPUs in BGC Holdings, and issued $49.2 million of RSU Tax Accounts for the redemption of 10.6 million non-exchangeable Preferred Units in BGC Holdings, based on their fixed cash value. As a result of the Corporate Conversion, on July 1, 2023, the Company issued 38.6 million restricted stock awards and 25.3 million RSUs for the redemption of 54.0 million non-exchangeable LPUs and 9.9 million non-exchangeable Preferred Units in BGC Holdings, and granted $74.0 million of RSU Tax Accounts for the redemption of 16.3 million non-exchangeable Preferred Units in BGC Holdings, based on their fixed cash value. The Company incurred compensation expense related to Class A common stock, LPUs (prior to the Corporate Conversion) and RSUs held by BGC employees as follows (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Issuance of common stock and grants of exchangeability | $ | 242 |  |  | $ | 32,469 |  |  | $ | 154,146 |  |  | $ | 83,064 |
Allocations of net income and dividend equivalents¹ | 1,137 |  |  | 3,492 |  |  | 4,154 |  |  | 11,916 |
LPU amortization | — |  |  | 18,961 |  |  | 40,878 |  |  | 53,585 |
RSU, RSU Tax Account, and restricted stock amortization | 67,889 |  |  | 2,808 |  |  | 78,107 |  |  | 13,174 |
Equity-based compensation and allocations of net income to limited partnership units and FPUs | $ | 69,268 |  |  | $ | 57,730 |  |  | $ | 277,285 |  |  | $ | 161,739 |
____________________________ 1 Prior to the Corporate Conversion, certain LPUs generally received quarterly allocations of net income, including the Preferred Distribution, and were generally contingent upon services being provided by the unit holders. Subsequent to the Corporate Conversion, this includes dividend equivalents on participating securities, the Preferred Return on certain RSU Tax Accounts, and quarterly allocations of net income, including the Preferred distribution to LPUs held by BGC employees in Newmark Holdings. Limited Partnership Units A summary of the activity associated with LPUs held by BGC employees is as follows (in thousands):
| BGC LPUs |  | Newmark LPUs
Balance at December 31, 2022 | 110,348 |  |  | 9,351 |
Granted | 9,688 |  |  | 2 |
Redeemed/exchanged units | (119,803) |  |  | (448) |
Forfeited units | (233) |  |  | — |
Balance at September 30, 2023 | — |  |  | 8,905 |
The LPUs table above includes both regular and Preferred Units. Preferred Units are not entitled to participate in partnership distributions other than with respect to the Preferred Distribution (see Note 2—“Limited Partnership Interests in BGC Holdings and Newmark Holdings” for further information on Preferred Units). Subsequent to the Corporate Conversion, there are still BGC employees who hold limited partnership interests in Newmark Holdings. These limited partnership interests represent interests that were held prior to the Newmark IPO and were distributed in connection with the Separation. Following the Newmark IPO, employees of BGC and Newmark only received limited partnership interests in BGC Holdings and Newmark Holdings, respectively. As a result of the Spin-Off, as the previous limited partnership interests in BGC Holdings held by Newmark employees and the existing limited partnership interests in Newmark Holdings held by BGC employees were/are exchanged/redeemed, the related capital was contributed to and from Cantor, respectively. The compensation expenses under GAAP related to the limited partnership interests are based on the company where the partner is employed. Therefore, compensation expenses related to the limited partnership interests of both BGC Holdings and Newmark Holdings that are held by BGC employees are recognized by BGC. The BGC Holdings limited partnership interests held by Newmark employees were included in the BGC share count and the Newmark Holdings limited partnership interests held by BGC employees are included in the Newmark share count. There were no limited partnership interests in BGC Holdings remaining upon the completion of the Corporate Conversion, and therefore, there was no compensation expense related to limited partnership interest in BGC Holdings recognized by BGC for the three months ended September 30, 2023. A summary of the BGC Holdings and Newmark Holdings LPUs held by BGC employees as of September 30, 2023, is as follows (in thousands):
| BGC LPUs |  | Newmark LPUs
Regular Units | — |  |  | 6,831 |
Preferred Units | — |  |  | 2,074 |
Balance at September 30, 2023 | — |  |  | 8,905 |
Issuance of Common Stock and Grants of Exchangeability Compensation expense related to the issuance of BGC or Newmark Class A common stock and grants of exchangeability on BGC Holdings (prior to the Corporate Conversion) and Newmark Holdings LPUs held by BGC employees is as follows (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Issuance of common stock and grants of exchangeability | $ | 242 |  |  | $ | 32,469 |  |  | $ | 154,146 |  |  | $ | 83,064 |
Prior to the Corporate Conversion, BGC LPUs held by BGC employees had become exchangeable or were redeemed for BGC Class A common stock on a one-for-one basis. Newmark LPUs held by BGC employees may become exchangeable or are redeemed for a number of shares of Newmark Class A common stock equal to the number of limited partnership interests multiplied by the current Exchange Ratio. As of September 30, 2023, the Exchange Ratio was 0.9243. A summary of the LPUs redeemed in connection with the issuance of BGC Class A common stock or Newmark Class A common stock (at the then-current Exchange Ratio) or granted exchangeability for BGC Class A common stock or Newmark Class A common stock (at the then-current Exchange Ratio) held by BGC is as follows (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
BGC Holdings LPUs | — |  |  | 8,066 |  |  | 25,684 |  |  | 18,732 |
Newmark Holdings LPUs | 53 |  |  | 142 |  |  | 230 |  |  | 489 |
Total | 53 |  |  | 8,208 |  |  | 25,915 |  |  | 19,221 |
As of September 30, 2023, there were no BGC Holdings LPUs remaining as a result of the Corporate Conversion. As of December 31, 2022, the number of share-equivalent BGC Holdings LPUs exchangeable for shares of BGC Class A common stock at the discretion of the unit holder held by BGC employees was 1.2 million. As of both September 30, 2023 and December 31, 2022, the number of Newmark Holdings LPUs exchangeable into shares of Newmark Class A common stock at the discretion of the unit holder held by BGC employees (at the then-current Exchange Ratio) was 0.2 million. LPU Amortization Compensation expense related to the amortization of LPUs held by BGC employees is as follows (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Stated vesting schedule | $ | — |  |  | $ | 18,843 |  |  | $ | 40,848 |  |  | $ | 53,421 |
Post-termination payout | — |  |  | 118 |  |  | 30 |  |  | 164 |
LPU amortization | $ | — |  |  | $ | 18,961 |  |  | $ | 40,878 |  |  | $ | 53,585 |
Prior to the Corporate Conversion, there were certain LPUs that had a stated vesting schedule and did not receive quarterly allocations of net income. These LPUs generally vested between two and five years from the date of grant. The fair value was determined on the date of grant based on the market value of an equivalent share of BGC or Newmark Class A common stock (adjusted if appropriate based upon the award’s eligibility to receive quarterly allocations of net income), and is recognized as compensation expense, net of the effect of estimated forfeitures, ratably over the vesting period. A summary of the outstanding LPUs held by BGC employees with a stated vesting schedule that do not receive quarterly allocations of net income is as follows (in thousands):
| September 30, 2023 |  | December 31, 2022
BGC Holdings LPUs | — |  |  | 47,222 |
Newmark Holdings LPUs | — |  |  | 98 |
Aggregate estimated grant date fair value – BGC and Newmark Holdings LPUs | $ | — |  |  | $ | 194,951 |
Compensation expense related to LPUs held by BGC employees with a post-termination pay-out amount, such as REUs, and/or a stated vesting schedule was recognized over the stated service period. These LPUs generally vested between two and five years from the date of grant. As of September 30, 2023, there were no outstanding BGC Holdings LPUs with a post termination payout, and there were 0.1 million outstanding Newmark Holdings LPUs with a post-termination payout held by BGC employees, with a notional value of approximately $0.6 million and an aggregate estimated fair value of $0.2 million. As of December 31, 2022, there were 0.8 million outstanding BGC Holdings LPUs with a post-termination payout, with a notional value of approximately $8.6 million and an aggregate estimated fair value of $3.9 million, and 0.1 million outstanding Newmark Holdings LPUs with a post-termination payout held by BGC employees, with a notional value of approximately $0.7 million and an aggregate estimated fair value of $0.3 million. Restricted Stock Units Compensation expense related to RSUs held by BGC employees is as follows (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
RSU amortization | $ | 36,568 |  |  | $ | 2,808 |  |  | $ | 46,786 |  |  | $ | 13,174 |
A summary of the activity associated with RSUs held by BGC employees and directors is as follows (RSUs and dollars in thousands):
| RSUs |  | Weighted- Average Grant Date Fair Value |  | Fair Value Amount |  | Weighted- Average Remaining Contractual Term (Years)
Balance at December 31, 2022 | 12,046 |  |  | $ | 4.11 |  |  | $ | 49,486 |  |  | 2.42
Granted | 60,881 |  |  | 4.04 |  |  | 243,885 |  |  |
Delivered | (10,422) |  |  | 4.13 |  |  | (43,011) |  |  |
Forfeited | (275) |  |  | 4.15 |  |  | (1,144) |  |  |
Balance at September 30, 2023 | 62,230 |  |  | $ | 4.00 |  |  | $ | 249,216 |  |  | 6.37
The fair value of RSUs held by BGC employees and directors is determined on the date of grant based on the market value of BGC Class A common stock adjusted as appropriate based upon the award’s ineligibility to receive dividends. As of September 30, 2023, 28.0 million RSUs of the total outstanding were eligible to receive dividends. The compensation expense is recognized ratably over the vesting period, taking into effect estimated forfeitures or accelerations of vestings. The Company uses historical data, including historical forfeitures and turnover rates, to estimate expected forfeiture rates for both employee and director RSUs. Each RSU is settled in one share of Class A common stock upon completion of the vesting period and conditions. For the RSUs that vested during the three months ended September 30, 2023 and 2022, the Company withheld shares of BGC Class A common stock valued at $2.7 million and $0.2 million to pay taxes due at the time of vesting. For the RSUs that vested during the nine months ended September 30, 2023 and 2022, the Company withheld shares of BGC Class A common stock valued at $10.2 million and $6.4 million to pay taxes due at the time of vesting. As of September 30, 2023, there was approximately $150.4 million of total unrecognized compensation expense related to unvested RSUs held by BGC employees and directors that is expected to be recognized over a weighted-average period of 6.37 years. In relation to the Corporate Conversion, the Company granted in total $123.1 million of RSU Tax Accounts. During the three months ended September 30, 2023, $10.6 million RSU Tax Accounts vested to pay taxes due at the time for certain related RSU vestings. As of September 30, 2023, there was approximately $111.7 million of total unrecognized compensation expense related to unvested RSU Tax Accounts held by BGC employees that is expected to be recognized over a weighted- average period of 8.51 years. The compensation expense related to the RSU Tax Accounts amortization held by BGC employees was $13.1 million for three and nine months ended September 30, 2023. Acquisitions In connection with certain of its acquisitions, the Company has granted certain LPUs (prior to the Corporate Conversion) and RSUs, and other deferred compensation awards. As of September 30, 2023, the aggregate estimated fair value of acquisition-related RSUs was $4.4 million, and as of December 31, 2022, the aggregate estimated fair value of acquisition-related LPUs and RSUs was $5.9 million. As of September 30, 2023 and December 31, 2022, the aggregate estimated fair value of the deferred compensation awards was nil and $23.9 million, respectively. The liability for such acquisition-related LPUs and RSUs is included in “Accounts payable, accrued and other liabilities” on the Company’s unaudited Condensed Consolidated Statements of Financial Condition. Restricted Stock BGC employees hold shares of BGC and Newmark restricted stock. Such restricted shares are generally salable by partners in five to ten years. Transferability of the restricted shares of stock issued prior to the Corporate Conversion, are not subject to continued employment or service with the Company or any affiliate or subsidiary of the Company; however, transferability is subject to compliance with BGC and its affiliates’ customary noncompete obligations. During the three and nine months ended September 30, 2023, zero and 0.2 million, respectively, BGC or Newmark restricted shares held by BGC employees were forfeited in connection with this provision. During the three and nine months ended September 30, 2022, 43 thousand and 47 thousand, respectively, BGC or Newmark restricted shares held by BGC employees were forfeited in connection with this provision. During the three months ended September 30, 2023 and 2022, the Company released the restrictions with respect to nil and 0.1 million of such BGC shares held by BGC employees, respectively. During the nine months ended September 30, 2023 and 2022, the Company released the restrictions with respect to 2.3 million and 0.2 million of such BGC shares held by BGC employees, respectively. As of September 30, 2023 and December 31, 2022, there were 0.1 million and 2.3 million of such restricted BGC shares held by BGC employees outstanding, respectively. During the three months ended September 30, 2023 and 2022, Newmark did not release restrictions on any restricted Newmark shares held by BGC employees. During the nine months ended September 30, 2023 and 2022, Newmark released the restrictions with respect to 1.1 million and 0.1 million, respectively, of restricted Newmark shares held by BGC employees. As of September 30, 2023 and December 31, 2022, there were nil and 1.1 million, respectively, of restricted Newmark shares held by BGC employees outstanding. In addition, as a result of the Corporation Conversion, on July 1, 2023, the Company granted 38.6 million restricted stock awards, which are subject to continued employment or service with the Company or any affiliate or subsidiary of the Company. The fair value of these restricted stock awards held by BGC employees is determined on the date of grant based on the market value of BGC Class A common stock adjusted as appropriate based upon the award’s ineligibility to receive dividends. As of September 30, 2023, 5.8 million of the total 32.4 million restricted stock awards outstanding (see table below), were eligible to receive dividends. The compensation expense is recognized ratably over the vesting period, taking into effect estimated forfeitures or accelerations of vestings. The Company uses historical data, including historical forfeitures and turnover rates, to estimate expected forfeiture rates for employee restricted stock awards. Each restricted stock award is settled in one share of Class A common stock upon completion of the vesting period and conditions. The compensation expense related to the restricted stock amortization on these awards held by BGC employees was $17.4 million for both the three and nine months ended September 30, 2023. For the restricted stock awards that vested during both the three and nine months ended September 30, 2023, the Company withheld no shares of BGC Class A common stock to pay taxes due at the time of vesting. As of September 30, 2023, there was approximately $52.3 million of total unrecognized compensation expense related to unvested restricted stock awards held by BGC employees that is expected to be recognized over a weighted-average period of 2.29 years. A summary of the activity associated with these restricted stock awards held by BGC employees is as follows (restricted stock and dollars in thousands):
| Restricted Stock |  | Weighted- Average Grant Date Fair Value |  | Fair Value Amount |  | Weighted- Average Remaining Contractual Term (Years)
Balance at December 31, 2022 | — |  |  | $ | — |  |  | $ | — |  |  | — |
Granted | 38,610 |  |  | 4.37 |  |  | 168,716 |  |  |
Delivered | (6,241) |  |  | 5.22 |  |  | (32,566) |  |  |
Forfeited | — |  |  | — |  |  | — |  |  |
Balance at September 30, 2023 | 32,369 |  |  | $ | 4.21 |  |  | $ | 136,150 |  |  | 2.29

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