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Technology Stocks : SUN microsystems: 7/18/96 quarterly report - BIG!
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To: william liao who wrote (46)7/10/1996 4:30:00 PM
From: Hsi-wei Chao   of 386
 
The insider trading in May is a very old news. It was out in May.
If you track back the main thread "Sun Microsystems", you should
find some discussions in May and March on concerns about SUNW insider
trading.

If you look more carefully, McNealy actually sold 100K of the
150K options he exercised in May. And that accounts for less than
2% of his holdings. Stock options account to a major part of many
high tech companies' executives pays. And there are many
(SEC. or company's internal) regulations on when and how those
options can be traded. I believe in SUNW's case, executives have
a narrow trading window (when they can sell) once a quarter or maybe
only once every half year. I know for sure some company has
the rule that executive insiders only have a narrow trading window once every six months. Under these circumstances, they'd be fool if they don't exercise/sell some of the options when the trading window opens and when the stock is at/near the highs, particularly for volatile high-tech/high-growth stocks.

And there's also tax concerns on the timing of exercising stock
options. Basically you want to exercise (buy) the options when you think the stock is at the lows to minimize AMT (Alternative Minimum Tax) exposure. McNealy exercised 150K options and sold 100K. Obviously part of the money for the sale of the 100K is to finance the exercise of the 150K, and the rest of the money just goes to part of his executive pay package and IRS.

IMHO, the published SUNW insider tradings don't seem to be a sign of
concern to me. There's been enough beating on this stock for
unknown reason. I guess mostly due to fear and overall market
sentiment. If this can be a reason to sell or drive the stock
price south, it seems to me that it just creates a buying opportunity
for others.

Hsi-wei
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