i think your point #2 has some validity. but like i said, i'm not so impressed when people pay 2 or 3 dollars for a 30-dollar stock. since they are essentially long those shares anyway, they are not adding anything to their delta. hence all they are really doing is a tax management issue. to which extent, i agree with your #2 that they probably figured it was a tax-efficient time to exercise (i.e., a low point for the stock). and compared to exercising when the stock was at $150, i'd say they're being very smart!
but that's not at all like putting up full-price money to buy shares on the open market. that is why studies of insider trading, which have shown correlations of stock prices with insider purchases, focus on purchases at market prices.
that is how an exec really puts his money where his mouth is.
obligatory "gotcha" feed: on the other hand, if i was a billionaire i wouldn't screw around with silly games like this. no fiduciary would overweight a billion-dollar portfolio consisting of a billion dollars in one equity selling at ten times sales with even more of the same.
obligatory "anti-gotcha" feed: on the other other hand, Bill Gates and Michael Dell only got to be obscenely rich by staying fully invested in their ridiculously concentrated portfolios when their net worths were "only" a billion.
weekend extra "gotcha" feed: on the other other other hand, Toby Lenk (former CEO of etoys) lost his entire ETYS net worth (which peaked at $600MILLION) because he never cashed it in. he was doing it for the "principle" or some such crazy thing (and i respect that!). but most people would say that dude should've followed the prudent man's rule and DIVERSIFIED!
weekend extra "anti-gotcha" feed: how impressed can i be if Jacobs paid some portion of $35 million as taxes to exercise deep in the money options when in his spare time he gives the San Diego Symphony $100 million? what is a $100 million tax deduction worth? $35 mil? patterns, patterns, everywhere....
anywhooo, as i said before, i would have been much more impressed by $100 million in toilets for India, but i'm an "old economy" guy i guess...
moral of the story: it all comes down to how lucky you feel. |
