Some CEOs and founders are dumping shares at historic levels, ahead of possible changes in some U.S. and state tax laws.
Nearly a dozen high-profile founders and CEOs have sold off a record $69 billion of their stock and could sell more before the end of the year. All of last year, they sold none, The Wall Street Journal reported.
While it is not unusual for executives to often sell shares under advance trading arrangements, the volume being sold this year is extraordinary at a time when there have been record valuations.
Retail investors — individual investors who invest money in their own accounts — this year are dumping billions on buying dips. Buying the dip happens when an investor buys an asset after a price drop, buying at a lower price, hoping to profit if the market rebounds, according to Investopedia. Some traders buy the dips if an asset falls within an otherwise long-term uptrend, hoping the uptrend will restart after the drop.
Some observers say the run to dump shares revolves around avoiding high taxes. “Every fall, investors are cautioned about inheriting a tax bill by buying mutual funds about to make large year-end capital gains distributions. Buy afterward and you can avoid an ugly surprise,” U.S. News & World Report reported.
Distribution stock refers to large blocks of a security that are sold into the market gradually in smaller blocks so not to drive down its price, Investopedia reported.
Also, a “distribution day is a significant decline in the Nasdaq or S&P 500 in higher volume than was seen in the previous session,” Investors.com reported. A distribution day marks heavy selling by institutional investors, which are the heavyweights who set a market’s direction.
Experts expect there will be more CEOs dumping shares in December due to tax planning and looming tax hikes, CNBC reported.
In all, 48 top executives have collected more than $200 million each from stock sales, according to a Wall Street Journal analysis of data from the research firm InsiderScore.
“What you’re seeing is unprecedented” in recent years, said Daniel Taylor, an accounting professor at the University of Pennsylvania’s Wharton School who studies trading by executives and directors, in a Wall Street Journal report.
Here are 10 CEOs dumping shares by the billions on dip-buying retail investors, near all-time highs and record valuations.
1. Ronald Lauder of Estée Lauder
Cosmetics billionaire Ronald Lauder is one of the CEOs dumping shares. He’s the youngest son of makeup mogul Estée Lauder, who founded her beauty company in 1946. He became the chairman of Clinique Laboratories in 1994, a position he still holds, Forbes reported.
With an estimated net worth of $5.3 billion net worth, Lauder sold 2 million shares of his company this year for more than $600 million, The Wall Street Journal reported.
2. Google co-founders Larry Page and Sergey Brin
Google co-founders Page and Brin haven’t sold stock in their company since 2017. But in 2021, each sold nearly 600,000 shares for about $1.5 billion before taxes. Each still owns about 6 percent of Google’s parent company, Alphabet, according to FactSet.
The company reported record revenues and profits more than doubled from a year earlier. The share price reached an all-time high of $3,019.33 on Nov. 19 and has since pulled back to about $2,950, The Wall Street Journal reported.
3. The Walton family, heirs to Walmart Inc.
The Waltons are the world’s wealthiest family with a reported net worth of $238 billion, according to the Bloomberg Billionaires Index. About half that wealth is from the world’s largest retailer, which was founded by Sam Walton in 1950.
This year, the Walton family has sold $6.18 billion in Walmart stock through their family trust and investment vehicle.
While family members routinely sell off shares, this year they sold off more than ever. The Walton family quadrupled the number of shares its members sold. In 2020, they sold off just $1.5 billion. This year, the company posted higher sales in three quarters.
4. Mark Zuckerberg, CEO of Facebook parent Meta Platforms Inc.
While Facebook has been plagued with crisis after crisis in 2021, that didn’t keep Mark Zuckerberg from dumping shares. He has sold $4.47 billion in stock from Meta (the new name for Facebook’s parent company). Zuckerberg’s net worth is $115 billion. His stock sales are up nearly sevenfold from a year ago.
5. Elon Musk, Tesla Inc. CEO
Entrepreneur and business magnate Elon Musk is the founder, CEO, and chief engineer at SpaceX and he’s the early-stage investor, CEO, and product architect of Tesla, Inc. Considered the world’s richest person, he has a net worth of $297 billion. This year he has sold $10.2 billion—including roughly $4 billion to cover tax withholding on option exercises— in Tesla shares since Nov. 8, according to Inside Arbitrage.
This is his first sale of company shares since 2010.
6. Satya Nadella, Microsoft CEO
Satya Nadella has dumped half his shares in the company. For this, he raked in $285 million for 838,584 shares on Nov. 22-23, according to company filings with the federal Securities and Exchange Commission. Nadella sold the shares “for personal financial planning and diversification reasons,” according to a company spokesperson.
This was apparently the largest share dump by Nadella since being named CEO in 2014, and has raised questions among some analysts, The Wall Street Journal reported.
Some experts say Nadella may have wanted to minimize his liability under Washington’s new 7 percent capital gains tax, which goes into effect Jan. 1, Ben Silverman, director of research at InsiderScore/Verity, told Fortune.
“Whether that was a motivator or not, I can’t speak to that,” Silverman said. But “it’s worth pointing out that the timing, coming about six weeks before the implementation of that [tax], is curious for a sale of this size.”
This wasn’t the first time Nadella sold a large number of Microsoft shares. In late August and early September, he dumped some 75,000 shares for around $22.9 million, according to federal filings.
“I think a sale like this is partially an acknowledgment of stock prices across the market being very high, relative to some of the things going on in the economy,” said Silverman, who is based in Seattle.
In fiscal year 2021, Nadella earned $49.9 million, of which $33 million was from stock bonuses. In 2020 and 2019, he was awarded stock bonuses of $30.7 million and $29.7 million, respectively, The Seattle Times reported.
7. Michael Dell, Dell Technologies Inc.
Billionaire businessman Michael Dell, the founder and CEO of technology infrastructure company Dell Technologies, sold 5 million shares for nearly $253 million. This is the first major share dump by Dell, who is worth an estimated $57.8 billion since retaking Dell public in 2018.
8. David Rubenstein, The Carlyle Group Co-Founder
David Rubenstein, co-founder and co-executive chairman of the global private equity firm The Carlyle Group, sold 11 million shares in 2021 for $495 million after making his first-ever sale in November 2020, The Wall Street Journal reported.
9. Charles Schwab, Charles Schwab Corporation Founder
Finance executive Charles Schwab, founder and chairman of the Charles Schwab Corporation, sold the most shares since 2015 in the company he founded. This year he has dumped 5.3 million shares for $361 million.
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10. Adam Aron, AMC Entertainment Holdings Inc. CEO
Adam Aron, chairman and CEO of AMC Entertainment Holdings and co-owner of the Philadelphia 76ers, is another of the CEOs dumping shares. He sold 625,000 shares in AMC, worth approximately $25 million, according to a filing with federal regulators.
Aron said the sale was for estate-planning purposes, The New York Post reported.
Aron told investors on a recent earnings call that he plans to sell a total of 1.25 million shares as part of what he said was “prudent estate planning” given the “potentially soaring capital gains tax rates and significant changes to what can be passed on to one’s heirs,” CNBC reported.