Bezos And Other Corporate Execs Sold Billions In Stock Before COVID-19 Rocked Market

Jeff Bezos and other corporate executives across the country sold approximately $9.2 billion in shares of their own companies between early February and the end of last week, salvaging potential losses of up to $1.9 billion, according to an analysis of more than 4,000 regulatory filings by the Wall Street Journal.

The largest seller was the richest man in the world – Jeff Bezos, who sold $3.4 billion in Amazon shares the first week of February, right before the market peaked – which avoided paper losses of approximately $317 million through March 20. The sale constituted roughly 3% of his holdings – and was nearly as much stock as he sold during the previous 12 months.

And while there is no indication that executives sold shares based on inside information – and the Journal notes that executives often sell shares early in the year for tax purposes, the amount of stock sold by US execs was up around 1/3 vs. the same period from the last two years according to the report.

Other execs who sold include BlackRock’s Laurence Fink, and IHS Markit’s Lance Uggla.

While Mr. Bezos’s sales accounted for more than a third of the 2020 sales, thousands of other insiders sold stock. More than 150 executives and officers individually sold at least $1 million worth of stock in February and March after having sold no stock in the previous 12 months, the Journal analysis found.

Wall Street executives also sold large dollar amounts, including Laurence Fink, CEO of BlackRock Inc., who sold $25 million of his company shares on Feb. 14, pre-empting potential losses of more than $9.3 million and Lance Uggla, CEO of IHS Markit Ltd., a data and analytics firm, who sold $47 million of his shares around Feb. 19. Those shares would have dropped in value by $19.2 million if Mr. Uggla had retained them. A spokesperson said the shares were sold under a preset plan. –Wall Street Journal

A BlackRock spokesman said that Fink’s sales were a small percentage of his overall holdings (under 5% according to his latest filing), and that he sold $18 million in stock around the same time last year.

Another exec who dodged losses is outgoing MGM CEO James Murren, who sold $22 million in stock – avoiding a potential $15.9 million loss by selling at the peak on Feb. 19 and 20. A spokesperson noted that the sales came one week after he announced his departure to help Nevada Gov. Steve Sosolak’s coronavirus response.

Among the executives who sold stock this year but not last year was Marc Rowan, co-founder and director of Apollo Global Management Inc. He sold $99 million in February and early March, avoiding paper losses of about $40 million. A spokesperson pointed to an Apollo public filing that described a plan, put in place last fall, allowing Mr. Rowan to sell shares. –Wall Street Journal

Some of the sales were related to automatic 10b5-1 plans which allow corporate executives to plan stock sales, while the stock market’s plunge may have triggered other plans, according to the report.

And as we noted last September, insider selling hit a 20-year high as corporate buybacks soared.

To summarize:

1. Companies issue record amounts of debt
2. Companies use the debt to repurchase record amounts of stock
3. Insiders sell (near) record amounts of stock to their own company, even as retail investors buy everything with the S&P at all time high

Months later, with coronavirus ravaging China and beginning to take a foothold in the US, execs sold more.

“What doesn’t change—even if there is such a plan—is that optically from an investor’s perspective it is always bad for investors when CEOs sell shares,” said corporate governance expert Adam Epstein, who advises CEOs to construct their portfolios so that they aren’t forced to sell shares in order to raise cash if their stock value drops sharply.

What fortunate timing.