Jobaaj Stories
A record $69 billion in stock will likely be sold by CEOs and corporate insiders in 2021, as tax hikes and higher share prices encourage them to take profits.
The CEOs, founders, and insiders of some of the world's most successful companies are cashing in on their stock at a record pace, from Satya Nadella at Microsoft to Jeff Bezos at Amazon. InsiderScore/Verity reported that as of Monday, insider sales, excluding sales from large institutional investors, were up 30% from 2020 to $69 billion, a rise of 79% from the 10-year average.
Due to tax planning, December is often an active month for sales, so the sale is likely to increase even more. And most of the stocks were sold as part of pre-scheduled selling plans, known as 10b5-1 programs.
This year's stock sales were dominated by a few big sellers, including Musk and Bezos, who collectively sold about $10 billion worth of stock. According to Ben Silverman, director of research at InsiderScore/Verity, the top four "super sellers" ( Musk, Bezos, Walton, and Mark Zuckerberg ) accounted for 37% of this year's total.
A number of factors are contributing to the increase in insider sales in 2021, but historically high stock valuations are the primary determinant, he said. As a result of the presence of 'super sellers', overall sales have increased during this period.
Last week Musk sold $1.05 billion in Tesla stock to pay taxes and exercise his options. Since his famous Twitter poll on November 6, their sales have totaled $9.85 billion, with around half taxed based on options and the rest from direct cash-outs.
During the year, Jeff Bezos sold Amazon stock worth $9.97 billion. While their business activity is roughly comparable to last year, they have more than four times the sales in 2019 and far exceed their $1 billion-per-year sales in previous years. It appears that the sale is part of a 10b5-1 plan, according to Securities and Exchange Commission paperwork.
Walton family trusts and investment vehicles sold $6.18 billion in Walmart shares this year. In order to maintain ownership of the company and fund the family's philanthropic activities, the family sells shares periodically. As part of a 10b5-1 plan, Zuckerberg sold $4.47 billion worth of Meta stock this year. As part of a 10b5-1 plan, Google founders Larry Page and Sergey Brin have sold nearly $1.5 billion of their Alphabet shares.
Aside from scheduled sales events, factors such as high valuations and taxes are also contributing to the increase in sales. Satya Nadella, the CEO of Microsoft, sold nearly half of his Microsoft shares last month for about $285 million. A statement from the company stated that the sale was for personal financial planning and diversification purposes.
However, Nadella would save on sales taxes now rather than next year. Washington state will begin imposing a 7% tax on capital gains from January 1. Up to $20 million in state taxes could have been saved by Nadella before the tax increase. Up to $700 million in Washington state taxes could have been saved by Bezoz before the tax increase.
The federal tax rate is likely to go up for the highest earners, leading to CEOs cashing out in order to avoid the increase. On income over $10 million, the House proposes an additional tax of 5%, while on income over $25 million, it proposes an additional tax of 8%.
Silverman said that vendors may be motivated by possible changes in federal and state tax laws.
A high stock valuation is probably the most important factor behind overall sales. Last month, CEO Adam Aron sold 625,000 shares of AMC stock for about $25 million, which is up more than 1,500% this year. With the recent changes in the law, he intends to sell 1.25 million shares as part of his prudent estate plan to address potentially raising capital gains tax rates and an heir who will inherit his shares.
