Insiders loading up on Nortel
Seven of 10 directors: 'Their actions speak for themselves'
Saturday » July 13 » 2002
Paul Vieira
National Post
Friday, July 12, 2002
The Canadian Press
Nortel chairman Lynton (Red) Wilson bought one million shares.
Nineteen directors and officers of Nortel Networks Corp. bought close to two million shares that were part of the company's multi-billion-dollar U.S. equity offering last month, with chairman Lynton (Red) Wilson taking one million shares for his own account.
According to insider trading reports filed yesterday with the U.S. Securities and Exchange Commission, the 1.82 million Nortel shares were acquired on June 12 at the offering price of US$1.41.
David Chamberlin, a Nortel spokesman, said there were no discounts; shares were not set aside exclusively for insiders; and the company issued no loans to help buy the shares. "There were no favours done for this thing. They bought at their own volition," he said. "Their actions speak for themselves."
Last month, the Brampton, Ont.-based company raised US$1.48-billion in the U.S. markets, through the sale of 632.5 million common shares at US$1.41 apiece and 28,750 equity units priced at US$22,542.53 a unit.
The Nortel insider who acquired the most common shares was Mr. Wilson, chairman of Nortel and CAE Inc., and former chairman and chief executive of BCE Inc., Nortel's former parent. He bought one million shares at a cost of US$1.41-million, boosting his holding of Nortel shares to 1,167,074, according to the SEC filings. "That definitely caught my attention," said one company watcher, who did not want to be named, about Mr. Wilson's purchase. (Mr. Wilson did not return calls seeking comment.)
Next on the Nortel insider list was Robert Brown, Bombardier Inc.'s chief executive and Nortel board member. He purchased 400,000 shares for US$564,000, increasing his Nortel holdings to 410,425 shares. After Mr. Brown, Gregory Mumford, Nortel's chief technology officer, bought the most shares, 100,000, for US$141,0000, increasing his total to 100,914.
Frank Dunn, Nortel's CEO, acquired 55,600 shares at a cost of US$78,396, boosting his holdings to 144,944.
Seven of Nortel's 10 directors bought shares. The only board members to abstain were John Cleghorn, chairman of SNC-Lavalin Group Inc. and former CEO of Royal Bank of Canada; Robert Ingram, chief operating officer of GlaxoSmithKline PLC; and William Owens, co-CEO of Teledesic LLC, a U.S. satellite communications company.
Nortel shares in New York finished yesterday's session at US$1.44, up US11¢ or 8.2%. On the Toronto Stock Exchange, the shares closed at $2.19, up 15¢.
So what does all this buying mean for Nortel shareholders?
"I would construe this as a vote of confidence" for the company, said Thomas Caldwell, chairman of Caldwell Securities.
"The people who conceptually should know about the business buying or selling securities is some degree of an indicator."
Mr. Caldwell is a strong proponent of directors and officers having "serious" investments in the companies in which they are involved in, as opposed to holding stock options. "In options, you don't get to participate in the downside. When you buy the stock, then you get to participate in the downside and the upside like the rest of us. Frankly, I feel more comfortable with that. I like to see people with serious amounts of money on the deck."
Meanwhile, the Nortel watcher said investors should be cautious reading too much into the latest SEC filings.
"What this probably says is that the guys at Nortel think the stock has bottomed. But the guys at Nortel aren't any better at stockpicking than anyone else," the watcher said, citing Bernie Ebbers, the former WorldCom chief executive who has held on to tens of millions of shares in the scandal-plagued telecom.
"I don't think it's a signal that they have some special insight that there's something positive in the works."
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