The loans are guaranteed by CNC for insider purchases, but CNC has recourse against the execs if the loan is called on CNC. The stock purchased is held as collateral for loans. Interest rate is 5% or so, because of CNC's guarantees.
My guess is that CNC is looking at several larger acquisitions which would be highly accretive to earnings. CNC already has a lower PE at 13 times 98 earnings. If 98 earnings and 99 earnings are revised higher because of a couple of acquisitions, the stock price will move up.
I don't think CNC is preparing to sell out yet. A guy like John Sabl, the new general counsel from Chicago, wouldn't probably give up his law career for a short term bang, but its possible. After all, even if he's just brought in to handle a sell out, he gets $1.75 million a year of salary for the remaining 5 years on his employment contract under the Change of Control provision in his employment contract. Plus he bot stock.
But, I don't think that's the focus. I think a few more larger acquisitions in the $1 billion to $2 billion range are on the way, as John Thomas posted previously.
The bottom line is, these guys are aggresively buying the stock, when they already own a ton, and this is very very bullish. Alot of insiders buy some stock for image reasons or to establish a position, but these guys are hoarding it beyond any other hoarding or inside buying I've seen by any other company, with the possible exception of Worldcom in the last 12 months.
We're going to see an annoucement before Christmas in my opinion. |
