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.
Insiders like the Waltons, Mark Zuckerberg and Google’s co-founders have sold $63.5 billion.
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.
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Sky-high pricey artworks may not be flying off the auction block right now, but the art market is actually doing just fine.
That’s a key takeaway from a 190-plus page report written by Art Economics founder Clare McAndrew and published Thursday morning by Art Basel and UBS. The results were based on a survey of more than 3,600 collectors with US$1 million in investable assets located in 14 markets around the world.
That the art market is doing relatively well is backed by several data points from the survey that show collectors are buying plenty of art—just at lower prices—and that they are making more purchases through galleries and art fairs versus auction houses.
It’s also backed by the perception of a “robust art market feeling,” which was evident at Art Basel Paris last week, says Matthew Newton, art advisory specialist with UBS Family Office Solutions in New York.
“It was busy and the galleries were doing well,” Newton says, noting that several dealers offered top-tier works—“the kind of stuff you only bring out to share if you have a decent amount of confidence.”
That optimism is reflected in the survey results, which found 91% of respondents were optimistic about the global art market in the next six months. That’s up from the 77% who expressed optimism at the end of last year.
Moreover, the median expenditure on fine art, decorative art and antiques, and other collectibles in the first half by those surveyed was US$25,555. If that level is maintained for the second half, it would “reflect a stable annual level of spending,” the report said. It would also exceed meet or exceed the median level of spending for the past two years.
The changes in collector behaviour noted in the report—including a decline in average spending, and buying through more diverse channels—“are likely to contribute to the ongoing shift in focus away from the narrow high-end of sales that has dominated in previous years, potentially expanding the market’s base and encouraging growth in more affordable art segments, which could provide greater stability in future,” McAndrew said in a statement.
One reason the art market may appear from the outside to be teetering is the performance of the major auction houses has been pretty dismal since last year. Aggregate sales for the first half of the year at Christie’s, Sotheby’s, Phillips, and Bonhams, reached only US$4.7 billion in the first half, down from US$6.3 billion in the first half a year ago and US$7.4 billion in the same period in 2022, the report said.
Meanwhile, the number of “fully published” sales in the first half reached 951 at the four auction houses, up from 896 in the same period last year and 811 in 2022. Considering the lower overall results in sales value, the figures imply an increase in transactions of lower-priced works.
“They’re basically just working harder for less,” Newton says.
One reason the auction houses are having difficulties is many sellers have been unwilling to part with high-value works out of concern they won’t get the kind of prices they would have at the art market’s recent highs coming out of the pandemic in 2021 and 2022. “You really only get one chance to sell it,” he says.
Also, counterintuitively, art collectors who have benefited from strength in the stock market and the greater economy may be “feeling a positive wealth effect right now,” so they don’t need to sell, Newton says. “They can wait until those ‘animal spirits’ pick back up,” referring to human emotions that can drive the market.
That collectors are focusing on art at more modest price points right now is also evident in data from the Association of Professional Art Advisors that was included in the report. According to APAA survey data of its advisors, if sales they facilitated in the first half continue at the same pace, the total number of works sold this year will be 23% more than 2023.
Most of the works purchased so far were bought for less than US$100,000, with the most common price point between US$25,000 and US$50,000.
The advisors surveyed also said that 80% of the US$500 million in transactions they conducted in the first half of this year involved buying art rather than selling it. If this pattern holds, the proportion of art bought vs. sold will be 17% more than last year and the value of those transactions will be 10% more.
“This suggests that these advisors are much more active in building collections than editing or dismantling them,” the report said.
The collectors surveyed spend most of their art dollars with dealers. Although the percentage of their spending through this channel dipped to 49% in the first half from 52% in all of last year, spending at art fairs (made largely through gallery booths) increased to 11% in the first half from 9% last year.
Collectors also bought slightly more art directly from artists (9% in the first half vs. 7% last year), and they bought more art privately (7% vs. 6%). The percentage spent at auction houses declined to 20% from 23%.
The data also showed a shift in buying trends, as 88% of those polled said they bought art from a new gallery in the past two years, and 52% bought works by new and emerging artists in 2023 and this year.
The latter data point is interesting, since works by many of these artists fall into the ultra contemporary category, where art soared to multiples of original purchase prices in a speculative frenzy from 2021-22. That bubble has burst, but the best of those artists are showing staying power, Newton says.
“You’re seeing that kind of diversion between what’s most interesting and will maintain its value over time, versus maybe what’s a little bit less interesting
and might have had speculative buying behind it,” he says.
Collectors appear better prepared to uncover the best artists, as more of those surveyed are doing background research or are seeking advice before they buy. Less than 1% of those surveyed said they buy on impulse, down from 10% a year earlier, the report said.
Not all collectors are alike so the Art Basel-UBS report goes into considerable detail breaking down preferences and actions by individuals according to the regions where they live and their age range, for instance. The lion’s share of spending on art today is by Gen X, for instance—those who are roughly 45-60 years old.
Despite a predominately optimistic view of the market, of those surveyed only 43% plan to buy more art in the next 12 months, down from more than 50% in the previous two years, the report said. Buyers in mainland China were an exception, with 70% saying they plan to buy.
Overall, more than half of all collectors surveyed across age groups and regions plan to sell, a reversal from past years. That data point could foretell a coming buyer’s market, the report said, or it “could be indicative of more hopeful forecasts on pricing or the perception that there could be better opportunities for sales in some segments in the near future than there are at present.”
In the U.S., where 48% of collectors plan to buy, Newton says he’s seeing a lot of interest in art from wealth management clients.
“They’re looking for ideas. They’re looking for names of artists that can be compelling and have staying power,” Newton says. “That’s definitely happening from an optimistic standpoint.”
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