Rude- While I think it is always relevant to ask the question, when you see increased insider selling, "Is something funny going on here?"...in this particular case, I don't think (and likely you weren't implying) that anything really smelly in Austin (besides some occasional bad TexMex)...
Dell set up MSD Capital...either back in 1997 or 1998....a venture capital fund...initially, he was funding with a 1 billion dollar commitment...since then, the commitment could have been raised (dunno)..anyway, that money had to come from somewhere (!) and I don't even think MD has 1 billion laying around...
Now, I guess one could ask the question: Should someone like MD be allowed to diversify his Dell holdings, and start his own private venture capital fund? Why doesn't he just keep it all his net worth in Dell stock? Doesn't he believe in the company's prospects?
Well, these questions really don't hold water, because he still has (something like) 80% or more of his net worth tied up in Dell stock (IMO, that is plenty of incentive to do well)...perhaps the easiest test (is the following question): What would you or I do (in his position)? If you had 80% of your net worth tied up in one company's stock (a company, btw, that you founded, and you have your name on!), would you be motivated to do well....I think so!
If it were me, I probably would have diversified much more than MD, and much earlier......because my attitude would be, "After 90,000%+ return...shareholders are telling me that I'm not concerned about shareholder value...that I'm not allowed to enjoy the fruits of my labor? I've given my life for this company......and I should be able to diversify into some other areas where I may have an interest......After all, MD (as much as we would like him to be) is not a slave, and is allowed to have his own interests too.....After all, he is just a guy like you or me....(certainly much richer than I'll ever be....about on par with Venkie and Sig <G>)
MD is, obviously, not breaking new ground here...Gates, and others have those own venture capital funds, and no one seems to care or mind...come to think of it, maybe the same questions are now coming up on the Microsoft board (the stock is down as much as Dell this year, so far..and its 2 year performace is pretty close to Dell's)..
Also, until Jan. 1st, Dell's stock had continued to do well during MD's 2 years of selling...1998 was a particularly good year, and, although 1999 was a disappointment for many, the stock STILL returned 39%...
Final couple thoughts: One, it appears that the other main beneficiary of MD's sales was his (and his wife's) foundation..as you know, it has become "en vogue" for tech entreprenuers to be giving their wealth away to charitable causes. This is a good thing. It is needed. Our country has enormous needs that our government is unwilling or unable to support. So, I think it would also be wrong for us to criticize someone who is (generally) doing the right thing....helping support needs that our country has...even if this is done for some face-saving, political reason....
I don't think we should paint (and I'm not saying you are) these guys in a corner, and say "damned if you do, damned..."...I mean, would the only way that MD could have sold some stock be (if the stock had continued to return 200% a year during 1999, and on pace in 2000?)......that's not realistic.......We are not talking about some CEO who is selling out after the IPO....or (recent January performance aside) we are not talking about a stock that it is crashing and burning here...
Finally (thank goodness), maybe the most interesting argument COULD BE that MD's sales represent some sort of "maturing" of the stock...that, it is a signal that he (and perhaps others) think that the stock can no longer produce 200% a year returns....and that stockholders need to get used to much more modest returns...to this, I would likely agree....but I don't attribute that maturing (in any part) to his sales of stock, but rather the "law of larger numbers" and the impossibility of a stock to appreciate at 200% p.a. ad finitum...the maturing of the stock would have happened with (or without) the sales....
After the run Dell's (stock) has had, if MD can't sell his shares (keeping in mind that over 80% of his net worth is still tied up in one company...something you or I would never do personally)....no CEO should be able to....I don't see any grounds for cause and effect here...and I don't think that the shares sales are so large that they are depressing the stock's price in any significant way....
(I am still self-debating the last little "episode" and some insider selling (by others, other the MD) in early Jan./late December...the timing was not the best, although, some may have been scheduled far in advance...) |
