CEOs and corporate insiders sold off a record $69 billion in stocks in 2021. High share prices combined with a looming tax hike for the wealthy encouraged many corporate insiders and leaders to sell off now.
Corporate Insiders and CEOs Cashing in Stock Options
Some of the more prominent names that sold off their stocks this year include Satya Nadella of Microsoft, Jeff Bezos of Amazon, and Elon Musk of Tesla.
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The rate at which stocks were sold off by corporate insiders is the highest on record. The $69 billion total is 30% higher than stocks sold in 2020. It’s also 79% higher versus a 10-year average.
The numbers are according to InsiderScore/Verity. The firm excluded large institutional sales in their computation. They just focused on company bigwigs such as CEOs and key officers.
This December, analysts expect even more stock sell offs from corporate insiders. December is often an active month for stock trading due to tax planning purposes.
Are Sell Offs A Warning Sign?
Many market watchers view corporate insider selling as a warning sign. They also attribute the sell off as a sign of stock prices peaking.
However, recent activities do not support the notion. Amazon and Tesla stocks continue to gain despite selling activities from its leadership.
It helped that most of the stocks sold consisted of predetermined selling plans or 10b5-1 programs.
The majority of stocks sold this year came from a few large sellers. Both Musk and Bezos sold around $10 billion worth of stocks.
Combining the sales of corporate insiders Musk, Bezos with that of the Walton family and Mark Zuckerberg totaled 37% of this year’s sales. Ben Silverman, InsiderScore/Verity director of research, attributed a couple of reasons for the sell off.
“The increase in the dollar value of insider sales in 2021 can be attributed to multiple factors, with historically high stock valuations being the primary driver. The presence of ‘super sellers’ during the period helped pump up sales total,” he added.
Walton Family, Mark Zuckerberg, Larry Page, Sergey Brin, and Satya Nadella
Apart from the highly coveted sales of Musk and Bezos, the Walton family also sold shares to fund philanthropic efforts and maintain ownership levels.
This year, they disposed of $6.1 billion worth of Walmart shares. Meanwhile, Facebook (now Meta) CEO Mark Zuckerberg sold $4.47 billion in Meta stock as part of his 10b5-1 plan.
The same goes for Google founders Larry Page and Sergey Brin, who each dropped $1.5 billion of their Alphabet shares.
Taxes and high valuations are also encouraging corporate insiders to sell off. Microsoft CEO Satya Nadella traded almost half of his Microsoft shares in November for $285 million.
Microsoft issued a statement saying that Nedella’s decision was for “personal financial planning and diversification reasons.”
However, Nadella will also get to save taxes by selling now instead of later. Beginning January 1, Washington state will charge a 7% tax on capital gains over $250,000.
By selling ahead of the deadline, Nadella saves up to $20 million in state taxes. By selling much earlier, Bezos also saved around $700 million in Washington state taxes.
Watch the CNBC Television video reporting that CEOs unload record $69 billion of stock in 2021:
What do you think of the stock sell offs made by corporate insiders? Do you think there’s more to it than maintaining ownership levels and diversification?
Let us know what you think. Share your comments below.
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