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[flagged] Tim Cook Sells Millions in Apple Stock (marketwatch.com)
38 points by spking 52 days ago | hide | past | web | favorite | 34 comments

This is not news.

The timing of the sales was predetermined under what is known as a 10b5-1 plan[1], named after an SEC regulation that allows company insiders to avoid insider trading charges by setting up a schedule of sales in advance (typically a year).

[1] https://www.investopedia.com/terms/r/rule-10b5-1.asp

The predetermined sells side still has a loophole. Executives generally build their schedule in a relatively aggressive manner and cancel sells as they see fit.

I only know because I drove a CEO for the company I worked for to a meeting and we got to talking about stocks. He explained this loophole to me as his way to effectively trade how he wants with legal protection from insider trading.

From Wikipedia: "After Rule 10b5-1 was enacted, the SEC staff publicly took the position that canceling a planned trade made under the safe harbor does not constitute insider trading, even if the person was aware of the inside information when canceling the trade. The SEC stated that, despite the fact that 10b5-1(c) requires trades to be irrevocable, there can be no liability for insider trading under Rule 10b-5 without an actual securities transaction, based on the U.S. Supreme Court's holding in Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 (1975)." [0]

[0] https://en.m.wikipedia.org/wiki/SEC_Rule_10b5-1

The old saying I heard a while back was Executives sell stock for any number of reasons, but they buy it for only one.

The idea being the thing to maybe pay attention to are buys, not sells from those folks.

I worked at a place once where at a meeting the CEO was asked about selling a bunch of stock. He was pretty honest and said something like:

"I love this company and I'd love to 'double down' on it but as a private person most of my assets are in this company and it's time to diversify, even if just for my kids."

Anyway that was received well by most folks there.

The CFO noted "Not me I'm all in!".

Epilogue, the CEO was smart, the CFO less so... (granted CFO still did alright)

This has got to be a subsection of Betteridge's law. When the headline reads “___ sells stock” it’s always a predetermined sale.

If you sell immediately after your stocks vest, do you pay capital gains tax, or normal income tax? Does the clock start ticking while stock is vesting or after?

Vesting is a taxable event. You pay income tax on the amount. Selling is a taxable event, you pay capital gains on sell price minus vest price. If you sell immediately, the diff between sell and vest will be very close to zero, but it wont be zero, so you pay capital gains or erite capital loss...

Capital loss is tricky because of wash salrs rules, so likely you won't be able to write off...

For RSUs typically the amount vested is taxed as income. Often the broker sells shares to cover this and withholds the money for taxes. At that point your basis is the value of the stock on the day it vested. As always, be sure to check with your accountant/tax professional for your own situation.

RSUs (Restricted Stock Units) are taxed as income when they vest.

Typically shares are withheld to pay the tax before you ever see them. I.e. if your tax rate is 50% and you're getting an award of 100 shares, you'll only receive 50 shares in your account.

After that the shares are treated as if you'd purchased them at market rate. If you sell them immediately, there's no capital gain and no further tax to pay.

Where do the other 50 shares go? Is the government holding billions of dollars worth of shares in private companies? Or do they immediately put them on the market? Seems like that might distort the price.

It's called "sell to cover": All the shares vest, then a number of them are automatically sold on the open market and the proceeds are withheld to cover the income tax liability.

It's often possible to choose between doing that or keeping all the shares and paying the tax liability out of your salary.

Presumably this structure means the company pays the tax to the government, and are, in essence, buying back their own shares :)

But presumably they vest at a lower price - also do you have taper relief?

By taper relief I mean you sell older shares first and get taxed on long term capital gains first in first out.

RSUs are stock awards. The vesting price to the employee is zero, and so each vesting tranche is treated as income on the day of the vest.

Normal income tax. It starts ticking at the time of vesting. Capital gains comes into play if you sell it for a price different than what it vested for.

Not that news worthy...

Zuckerberg sold $400 million worth in the last month. I think that's more news worthy.

No more than when I liquidate 0.5% of my net worth.

(Zuck's funding his foundation, incidentally, and has been for years. https://www.vox.com/2018/2/14/17012846/mark-zuckerberg-faceb...)

To clarify something, whilst it's the timing of this is determined by a 10b5-1 plan the decision of how many shares to sell was entirely Cook's and it's not entirely un-newsworthy. It's generally considered a not great sign that the CEO of a company is so confident in it that he doesn't want to hold any stock in the company, and there have been times where this has preceded problems -for example Krzanic at Intel notably sold off all but his board required minimum in the year before he got fired.

No expert but I believe that in a 10b5-1 plan both the timing and the number of shares are predetermined.

If only the timing is predetermined then it defeats quite a bit of the purpose. Basically the idea is that the person cannot interfere with anything once the plan is set and thus cannot be accused of insider trading.

Most public companies have rules where senior execs 10b5-1 plans must be approved by the board. So "was entirely Cook's" is likely an incorrect assertion.

Flag and move on. Insiders sell their stock every day, can be multiple reasons and may or may not have anything to do with what apple is doing.

if I'm reading this right, he sold off his entire award that vested last week.

I think he sold half, but still he _vested_ 54.7 million dollars worth of stock... I'd happily sell that off instantly as well.


[edit--he sold all!]

No, he sold all of it, the rest was withheld for tax-purposes according to the article.

He got 560,000, sold 265,160 and 294,840 was withheld to "satisfy tax-withholding requirements for the vesting of the restricted stock units".

You can't sell shares you got ten years ago and not the ones you got yesterday.

You can actually.

If you own shares in a company with different purchase dates you can designate which ones you are selling. There can be tax reasons to choose one batch or another.

I was referring to the previous comment which implies that Tim was selling his most recent shares and not his oldest.

Sorry if it wasn't clear I must remember to write for ESL NH users.

I'm a native English speaker and I still have no idea what you were trying to say.

> You can't sell shares you got ten years ago and not the ones you got yesterday.

What do you mean?

Of course you can. Its a normal tax mitigation strategy.

Didn't he sell a bunch of stock around this time in 2017 and 2018 as well?

Are the new iphones that bad?

To quote the currently highest-voted comment:

> The timing of the sales was predetermined under what is known as a 10b5-1 plan[1], named after an SEC regulation that allows company insiders to avoid insider trading charges by setting up a schedule of sales in advance (typically a year).

A big pile of stock is worthless if you can't sell it. Cook probably wants to diversify, buy a house, boat, fancy car, and whatever else rich people like to do with their money.

Hoping for better waterproofing

another bad sign for the economy. the people with insider knowledge are trying to bail from the market ASAP to lock in their gains from the long run of economic growth.

>the people with insider knowledge are trying to bail from the market

1. Is there any evidence that these insiders are good at market timing?

2. It would be illegal, risky and stupid for the CEO of one of the biggest companies in the world to dump stock on obvious insider knowledge. Do you really believe Tim Cooke is going to stake his entire coproate reputation for another few million bucks when he's already filthy rich? Maybe, but I'm skeptical.

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