10b5-1 plans

  • 20 Dec 2012 at 11:01 AM

GM Is Buying Some Stock

One thing to savor about Treasury’s plan to get out of GM is how many corporate-governance hot buttons it gently caresses. “GM will purchase 200 million shares of GM common stock from Treasury at $27.50 per share” translates into news reports as “Treasury is losing a bazillion dollars,” since after all Treasury paid rather more than $27.50 per share originally, but there are other ways to look at it. One is that Treasury seems to have agreed a deal with GM after the 12/18 close at $27.50 for a stock that had closed at $25.49 and hasn’t touched $27 in ten months; i.e. GM overpaid for stock from a favored/nudgy insider by $400mm. Normally, privately negotiated buybacks from favored shareholders at a premium to market prices are criticized. Normally, privately negotiated buybacks from nudgy, “ooh-don’t-buy-a-corporate-jet” activist shareholders are called greenmail.

That doesn’t mean such buybacks aren’t market-pleasing, by the way. Much like Buffett’s recent slightly-above-market buyback, GM’s above-market buyback seems to have boosted the stock. Delightfully part of the boost is accounting-related. From the Journal: Read more »

  • 28 Nov 2012 at 4:48 PM

Everybody’s Jumping On The Insider Trading Bandwagon

It’s a tribute to Steve Cohen’s prescience/power/something that, on what is otherwise not a great day for SAC on the insider trading front, the rest of the news in the world is all pretty much “everybody is insider trading everything all of the time,” so, like, leave Steve alone! Today brings some old-fashioned mustache-twirling insider trading – here you can find the SEC’s charges against Delta Petroleum’s CEO, who apparently tipped his friends about an upcoming buyout and other news; those friends then sent each other emails saying things like “our mutual friend who will go unnamed WINK WINK WINK tells me that DPTR has good news coming MASSIVE NECK-STRAINING WINK” – but the real action is in these two Journal articles on what you might characterize as pervasive insider-trading-lite.

Who insider trades? Insiders, for one. This article about how executives have suspiciously good luck trading for their own account is perhaps too suspicious, as a lot of it is anecdotal or cherry-picked and it conflates 10b5-1 and discretionary trading a bit. Rule 10b5-1 plans, in which executives who do not have material nonpublic information set up automatic future sales (mostly) to top-tick the stock and/or pay for their kids’ college tuition, may have good or bad or indifferent results but you mostly can’t get mad at the executives if their 10b5-1 robots have suspiciously good timing; the robots really are mostly robots. On the other hand they’re not entirely robots and might be ripe for reforming; I’m like 75% on board with Ronald Barusch’s suggestions (I am not as troubled as he is by secret adoption of 10b5-1 plans during clean windows) but the bigger conceptual hole is that, as the Journal notes: Read more »