First Republic Bank Executives Sold $12M in Stock in Months Before Crash(wsj.com)
wsj.com
First Republic Bank Executives Sold $12M in Stock in Months Before Crash
https://www.wsj.com/articles/first-republic-bank-executives-sold-12-million-in-stock-in-months-before-crash-ca6ce79e
16 comments
> There's no reason for anyone to hold a significant amount of vested company stock.
Not holding vested stocks of the company you are CEO of shows you have very low confidence in the future of the company.
Not holding vested stocks of the company you are CEO of shows you have very low confidence in the future of the company.
Or it means the CEO wants to buy a yacht.
Either way if you think it's such a strong signal about company's prospects, go ahead and short companies whose CEO are selling the stock.
CEO stock sale is public information. Disclosing those sales is mandated by FCC.
You have no excuse for not being very rich.
Alternatively, CEOs are selling stock for variety of reasons and you can't make judgements about the company with confidence greater than 50%. And lower confidence is basically a random coin toss.
Either way if you think it's such a strong signal about company's prospects, go ahead and short companies whose CEO are selling the stock.
CEO stock sale is public information. Disclosing those sales is mandated by FCC.
You have no excuse for not being very rich.
Alternatively, CEOs are selling stock for variety of reasons and you can't make judgements about the company with confidence greater than 50%. And lower confidence is basically a random coin toss.
Yes, stock sales by insiders is public information.
Just a small correction. Stock sale disclosure is mandated by SEC, not FCC.
It is also not public information. They have to disclose it just to the SEC. Several companies also release their executives' trades to the public by default, but it is not mandatory.
You are showing confidence in the company by sticking around through the vesting cycle. For CEOs that period is often five to ten years. Selling it after that to buy a house or whatever isn't some confidence signal. At some point you just need the cash.
No, it means you're smart enough to know what risk is.
A few things. You generally have to schedule your sales ahead of time. There’s often a window in which you can sell.
What was their selling pattern like in 2021? Probably similar, but even if it wasn’t, it doesn’t mean anything nefarious. The stock was at ATH in November. Anyone smart would be selling into ATH at a likely cyclical top.
And lastly, insiders had to know that the fed’s projected rate hikes would hit the bond portfolio hard. I knew this, and I’m not an insider.
So, in summary, this is a nothing burger.
What was their selling pattern like in 2021? Probably similar, but even if it wasn’t, it doesn’t mean anything nefarious. The stock was at ATH in November. Anyone smart would be selling into ATH at a likely cyclical top.
And lastly, insiders had to know that the fed’s projected rate hikes would hit the bond portfolio hard. I knew this, and I’m not an insider.
So, in summary, this is a nothing burger.
Up until a few months ago you could always schedule it all to be sold based on no insider info, and then continuously cancel the ongoing sales based on insider information (canceling was not considered trading).
https://www.sec.gov/news/statement/lizarraga-insider-trading...
And you could presumably do the same for buying. I'm not sure about doing so for buying and selling/shorting at the same time and then selectively cancelling.
https://www.sec.gov/news/statement/lizarraga-insider-trading...
And you could presumably do the same for buying. I'm not sure about doing so for buying and selling/shorting at the same time and then selectively cancelling.
> And lastly, insiders had to know that the fed’s projected rate hikes would hit the bond portfolio hard. I knew this, and I’m not an insider.
The problem with this, is that they presumably didn't work to protect their interests, or their customer's interests, by hedging appropriately.
There were months in April or May where they could have sold their long-term bonds and bought short-term bonds, to better hedge against FFR hikes.
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What we're concerned about are executives protecting themselves, while screwing over their companies and/or depositors.
The problem with this, is that they presumably didn't work to protect their interests, or their customer's interests, by hedging appropriately.
There were months in April or May where they could have sold their long-term bonds and bought short-term bonds, to better hedge against FFR hikes.
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What we're concerned about are executives protecting themselves, while screwing over their companies and/or depositors.
Yes, the pertinent question is are these sales in any way statistically significant? If no sales had been rendered for a long time, and then a huge sale, that would be more suspicious.
I think looking into what their selling pattern was like in 2021 makes sense. If it was similar, then yes, there's nothing to see here. Worth checking, though.
This shows the sales history of execs for the last two years: https://finance.yahoo.com/quote/FRC/insider-transactions/
The timing is maybe a little convenient but the amounts don’t seem to stand out.
The timing is maybe a little convenient but the amounts don’t seem to stand out.
Okay, looking at David Lichtman, Senior Executive Vice President and Chief Credit Officer, let's see.
https://finance.yahoo.com/screener/insider/LICHTMAN%20DAVID%....
In 2023: Sold $917k on Jan 19, $594k on Feb 17, and $1.966 million on Mar 6.
But maybe that's normal! Let's see.
In 2022: Sold $326k on Nov 15, and $2.151 million on Dec 14.
Huh. Sold nothing at all before November, but $5.628 million from Dec, 2022 to Mar, 2023. That's... I wish we could go back farther, but there were no sales at all in 2021, at last as far back as the records go, which is at least May, 2021.
So from May 2021 to November 2022, no sales at all, then $326,000, then from December 2022 to March 2023, right before the crash, $5,628,000.
Lucky timing on the part of that Chief Credit Officer of a failing bank, right?
How about James H. Herbert, II, Founder and Executive Chairman? Honestly, he looks pretty safe. Sales on a semi-regular basis for similar amounts. 40k shares in 2021, 55k in 2022, 35k in 2023, not too suspicious.
Even less suspicious is Rick Osterloh, Senior Vice President of Devices & Services at Google, who was appoint to the board in September 2022 and bought $148k of shares in March 2023, days before the failure. Ouch!
https://finance.yahoo.com/screener/insider/LICHTMAN%20DAVID%....
In 2023: Sold $917k on Jan 19, $594k on Feb 17, and $1.966 million on Mar 6.
But maybe that's normal! Let's see.
In 2022: Sold $326k on Nov 15, and $2.151 million on Dec 14.
Huh. Sold nothing at all before November, but $5.628 million from Dec, 2022 to Mar, 2023. That's... I wish we could go back farther, but there were no sales at all in 2021, at last as far back as the records go, which is at least May, 2021.
So from May 2021 to November 2022, no sales at all, then $326,000, then from December 2022 to March 2023, right before the crash, $5,628,000.
Lucky timing on the part of that Chief Credit Officer of a failing bank, right?
How about James H. Herbert, II, Founder and Executive Chairman? Honestly, he looks pretty safe. Sales on a semi-regular basis for similar amounts. 40k shares in 2021, 55k in 2022, 35k in 2023, not too suspicious.
Even less suspicious is Rick Osterloh, Senior Vice President of Devices & Services at Google, who was appoint to the board in September 2022 and bought $148k of shares in March 2023, days before the failure. Ouch!
Based on their disclosures today, it's clear that they're insolvent without cash infusions. Uninsured capital has left the building, they've suspended their dividend and its only a matter of time before they're bought and equity either zeroed out or purchased for pennies.
I'm sure some of these may be clawed back at some point, but its not clear that anyone will do that without the bank being taken over first by the FDIC.
I'm sure some of these may be clawed back at some point, but its not clear that anyone will do that without the bank being taken over first by the FDIC.
Plus, executive stock sales are all declared to the SEC well in advance and happen on a set schedule. You can go look up how many millions in company stock Satya Nadella or Tim Cook sold last month, but that doesn't automatically make it a scandal.