Elon Musk, Other Leaders Sell Stock at Historic Levels
Insiders like the Waltons, Mark Zuckerberg and Google’s co-founders have sold $63.5 billion.
5 min
Company founders and leaders are unloading their stock at historic levels, with some selling shares in their businesses for the first time in years, amid soaring market valuations and ahead of possible changes in U.S. and some state tax laws.
So far this year, 48 top executives have collected more than $200 million each from stock sales, nearly four times the average number of insiders from 2016 through 2020, according to a Wall Street Journal analysis of data from the research firm InsiderScore.
The wave has included super sellers such as cosmetics billionaire Ronald Lauder and Google co-founders Larry Page and Sergey Brin, who have sold shares for the first time in four years or more as the economic recovery fueled strong growth in sales and profit. Other high-profile insiders—including the Walton family, heirs to the Walmart Inc. fortune, and Mark Zuckerberg, chief executive of Facebook parent Meta Platforms Inc.—have accelerated sales and are on track to break recent records for the number of shares they have sold.
Across the S&P 500, insiders have sold a record $63.5 billion in shares through November, a 50% increase from all of 2020, driven both by stock-market gains and an increase in sales by some big holders. The technology sector has led with $41 billion in sales across the entire market, up by more than a third, with a smaller amount but an even bigger increase in financial services.
“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. He said 2021 marks the most sales he can recall by insiders in a decade, resembling waves of sales during the twilight of the early 2000s dot-com boom.
Insiders have a long history of selling at peaks and buying in troughs, Mr. Taylor said.
Investors sometimes worry that large sales by insiders mean they don’t expect significant further share-price increases, and big, unexpected sales can weigh on share prices. Companies often require top executives to hold stakes equivalent to several times their annual salary, but many high-profile executives easily exceed those thresholds even after selling.
Executives aren’t required to say why they sold, and few do. The heaviest selling came as lawmakers in Washington hashed out potential tax increases as part of the Democrats’ Build Back Better legislative package, at times considering raising the long-term capital-gains tax rate. In November, insiders unloaded a collective $15.59 billion.
The legislation, pending in the Senate, imposes a 5% tax on adjusted gross income above $10 million beginning in 2022, and another 3% on income over $25 million, including capital gains from stock sales. Congressional revenue estimates assume taxpayers will accelerate capital gains in 2021. Wealthy taxpayers could save up to $8 million in taxes on every $100 million of shares sold ahead of the effective date, Mr. Taylor said. Such potential tax savings have been “a powerful incentive to sell this year,” he said.
Tesla Inc. CEO Elon Musk, considered the world’s richest person, with a net worth of about $270 billion, ridiculed a proposed tax on billionaires’ unrealised capital gains, saying on Twitter that eventually the government runs “out of other people’s money and then they come for you.” He has moved to sell more than $10 billion in Tesla stock over about a month—including roughly $4 billion to cover tax withholding on option exercises—in his first sale of company shares since 2010, other than sales designated as made solely to satisfy tax-withholding obligations.
Microsoft Corp. CEO Satya Nadella last month sold half his total stake, for about $374 million before taxes. Analysts said the move could be related to Washington state instituting a 7% tax for long-term capital gains next year. A Microsoft spokesman said at the time that the sale was for “personal financial planning and diversification reasons.”
Another spike in insider-stock sales occurred in May when company leaders sold off $13.12 billion in shares, following strong corporate earnings reports.
The Journal examined data on company leaders’ stock transactions through Dec. 3, drawn from regulatory filings by InsiderScore. Sales marked as made solely to satisfy tax withholding requirements were excluded. Aggregate figures, through Nov. 30, exclude sales by major shareholders who aren’t also executives or directors.
About a dozen high-profile founders and CEOs sold millions of dollars in company shares this year after selling none in all of 2020, in several cases selling for the first time in five or 10 years.
Messrs. Page and Brin last sold stock in Google parent Alphabet Inc. at about $800 a share in 2017, according to InsiderScore. When they returned to the market in May, shares had risen to $2,200. This year, they have each sold nearly 600,000 shares for about $1.5 billion before taxes. Each still owns about 6% of Alphabet, according to FactSet.
The duo’s sales came as the company reported record revenues and profits more than doubled from a year earlier, and seven months after the Justice Department and state attorneys general filed a civil antitrust lawsuit against Google. The company’s share price reached an all-time high of $3,019.33 on Nov. 19, and has since pulled back to about $2,950.
An Alphabet spokesman declined to comment. Messrs. Brin and Page didn’t respond to a request for comment.
Mr. Lauder, the son of Estée Lauder Cos.’ founders, has shed just over two million shares this year, for more than $600 million before taxes in his first sales since 2016.
Dell Technologies Inc.’s Michael Dell and the Carlyle Group’s David Rubenstein also came off the sidelines over the past year. Mr. Dell sold five million shares for nearly $253 million before taxes, his first since taking Dell public again in 2018. Mr. Rubenstein sold 11 million shares this year for $495 million before taxes, after making his first-ever sale in November 2020. His sales have followed him stepping aside as co-CEO and transitioning into a role as co-chairman.
A spokesman for Mr. Lauder declined to comment. Spokespeople for Mr. Dell didn’t respond to requests for comment.
Other insiders continued selling but at a faster clip this year. The Walton family quadrupled the number of shares its members sold, receiving $6.5 billion before taxes so far in 2021, from $1.5 billion in 2020. The sales came in a year when Walmart’s share price flirted with all-time highs, and the company posted higher sales in three quarters.
Mr. Zuckerberg increased the number of Meta shares he sold nearly sevenfold from a year ago, collecting nearly $4.5 billion before taxes. His selling came as the company reported record sales and earnings, despite challenges presented by iPhone privacy changes and congressional hearings over harms from its platforms following the Journal’s Facebook Files series.
Walmart and Meta spokespeople said the sales are generally governed by preset trading plans. They said the Walton family’s proceeds help fund nonprofit initiatives, and Mr. Zuckerberg’s fund the Chan Zuckerberg Initiative LLC, his family’s for-profit philanthropic company.
Executives often sell shares under advance trading arrangements, dubbed 10b5-1 plans, that trigger sales on a fixed schedule or at price thresholds to avoid running afoul of insider-trading rules. The plans were used in almost two-thirds of stock sales last year—up from 30% in 2004—but some investors and regulators worry they can be abused. The Securities and Exchange Commission on Wednesday is scheduled to vote on a proposal that would change the rules governing the trading plans.
Finance executive Charles Schwab sold the most shares since 2015 in the company he founded, Charles Schwab Corp.: 5.3 million shares for $361 million.
“People are clearly being opportunistic,” said Ben Silverman, InsiderScore’s director of research. “These guys have been telling you all year that the market is overheated.”
Soaring stock prices mean some executives raised the same amount of money, or more, selling fewer shares. Snap Inc. CEO Evan Spiegel set a price target to sell between $60 and $80, receiving a total of $710 million before taxes on 10 million shares—more than doubling his 2020 proceeds despite selling three million fewer shares.
Amazon.com Inc. founder Jeff Bezos typically sells about $10 billion in stock annually to help fund his space venture, Blue Origin LLC. This year, he has sold 25% fewer shares while collecting roughly the same amount of money before taxes because the company’s share price has doubled over the past two years.
Copyright 2020, Dow Jones & Company, Inc. All Rights Reserved Worldwide. LEARN MORE
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
Food prices continue to rise at a rapid pace, surprising central banks and pressuring debt-laden governments
4 min
LONDON—Fresh out of an energy crisis, Europeans are facing a food-price explosion that is changing diets and forcing consumers across the region to tighten their belts—literally.
This is happening even though inflation as a whole is falling thanks to lower energy prices, presenting a new policy challenge for governments that deployed billions in aid last year to keep businesses and households afloat through the worst energy crisis in decades.
New data on Wednesday showed inflation in the U.K. fell sharply in April as energy prices cooled, following a similar pattern around Europe and in the U.S. But food prices were 19.3% higher than a year earlier.
The continued surge in food prices has caught central bankers off guard and pressured governments that are still reeling from the cost of last year’s emergency support to come to the rescue. And it is pressuring household budgets that are also under strain from rising borrowing costs.
In France, households have cut their food purchases by more than 10% since the invasion of Ukraine, while their purchases of energy have fallen by 4.8%.
In Germany, sales of food fell 1.1% in March from the previous month, and were down 10.3% from a year earlier, the largest drop since records began in 1994. According to the Federal Information Centre for Agriculture, meat consumption was lower in 2022 than at any time since records began in 1989, although it said that might partly reflect a continuing shift toward more plant-based diets.
Food retailers’ profit margins have contracted because they can’t pass on the entire price increases from their suppliers to their customers. Markus Mosa, chief executive of the Edeka supermarket chain, told German media that the company had stopped ordering products from several large suppliers because of rocketing prices.
A survey by the U.K.’s statistics agency earlier this month found that almost three-fifths of the poorest 20% of households were cutting back on food purchases.
“This is an access problem,” said Ludovic Subran, chief economist at insurer Allianz, who previously worked at the United Nations World Food Program. “Total food production has not plummeted. This is an entitlement crisis.”
Food accounts for a much larger share of consumer spending than energy, so a smaller rise in prices has a greater impact on budgets. The U.K.’s Resolution Foundation estimates that by the summer, the cumulative rise in food bills since 2020 will have amounted to 28 billion pounds, equivalent to $34.76 billion, outstripping the rise in energy bills, estimated at £25 billion.
“The cost of living crisis isn’t ending, it is just entering a new phase,” Torsten Bell, the research group’s chief executive, wrote in a recent report.
Food isn’t the only driver of inflation. In the U.K., the core rate of inflation—which excludes food and energy—rose to 6.8% in April from 6.2% in March, its highest level since 1992. Core inflation was close to its record high in the eurozone during the same month.
Still, Bank of England Gov. Andrew Bailey told lawmakers Tuesday that food prices now constitute a “fourth shock” to inflation after the bottlenecks that jammed supply chains during the Covid-19 pandemic, the rise in energy prices that accompanied Russia’s invasion of Ukraine, and surprisingly tight labor markets.
Europe’s governments spent heavily on supporting households as energy prices soared. Now they have less room to borrow given the surge in debt since the pandemic struck in 2020.
Some governments—including those of Italy, Spain and Portugal—have cut sales taxes on food products to ease the burden on consumers. Others are leaning on food retailers to keep their prices in check. In March, the French government negotiated an agreement with leading retailers to refrain from price rises if it is possible to do so.
Retailers have also come under scrutiny in Ireland and a number of other European countries. In the U.K., lawmakers have launched an investigation into the entire food supply chain “from farm to fork.”
“Yesterday I had the food producers into Downing Street, and we’ve also been talking to the supermarkets, to the farmers, looking at every element of the supply chain and what we can do to pass on some of the reduction in costs that are coming through to consumers as fast as possible,” U.K. Treasury Chief Jeremy Hunt said during The Wall Street Journal’s CEO Council Summit in London.
The government’s Competition and Markets Authority last week said it would take a closer look at retailers.
“Given ongoing concerns about high prices, we are stepping up our work in the grocery sector to help ensure competition is working well,” said Sarah Cardell, who heads the CMA.
Some economists expect that added scrutiny to yield concrete results, assuming retailers won’t want to tarnish their image and will lean on their suppliers to keep prices down.
“With supermarkets now more heavily under the political spotlight, we think it more likely that price momentum in the food basket slows,” said Sanjay Raja, an economist at Deutsche Bank.
It isn’t entirely clear why food prices have risen so fast for so long. In world commodity markets, which set the prices received by farmers, food prices have been falling since April 2022. But raw commodity costs are just one part of the final price. Consumers are also paying for processing, packaging, transport and distribution, and the size of the gap between the farm and the dining table is unusually wide.
The BOE’s Bailey thinks one reason for the bank having misjudged food prices is that food producers entered into longer-term but relatively expensive contracts with fertilizer, energy and other suppliers around the time of Russia’s invasion of Ukraine in their eagerness to guarantee availability at a time of uncertainty.
But as the pressures being placed on retailers suggest, some policy makers suspect that an increase in profit margins may also have played a role. Speaking to lawmakers, Bailey was wary of placing any blame on food suppliers.
“It’s a story about rebuilding margins that were squeezed in the early part of last year,” he said.
Interior designer Thomas Hamel on where it goes wrong in so many homes.
A “starchitect” name adds to a building’s allure—and how much an apartment may sell for.
