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It seems like a different story of corporate executive greed, at least at first glance. Monday, Pfizer (NYSE: PFE) and BioNTech (NASDAQ: BNTX) announced exciting news. Their BNT162b2 coronavirus vaccine candidate achieved at least 90% efficacy – much better than expected. This revelation was so good that it sparked a major stock market rally.
Then came more news: Pfizer CEO Albert Bourla sold part of his stake in the company on the day of the big BNT162b2 announcement. Should you be outraged? Or are the objections at the time of the sale of Bourla’s shares much louder for nothing?
Image source: Getty Images.
The full story
First of all, it is true that the CEO of Pfizer sold shares of the pharmaceutical company on November 9, the same day that Pfizer and BioNTech announced the excellent intermediate efficacy results of BNT162b2. To be precise, Albert Bourla sold 132,508 shares at $ 41.94 per share.
It’s also understandable why some might think it’s fishy that the head of a major drugmaker pocketed more than $ 5.5 million on a day when pharmaceutical stock jumped 15% following a major announcement. The timing could easily seem suspicious.
However, no conspiracy theory is necessary in this case. Why? Because the sale of Bourla shares was planned almost three months in advance.
The transaction for Bourla to sell those Pfizer shares went into effect on August 19, 2020. This was long before anyone at Pfizer (or elsewhere, for that matter) knew how the interim results of BNT162b2 were going to turn out. In fact, Bourla said in an interview that he was not informed of the results until the afternoon of Sunday, November 8.
A common practice
Bourla used a Rule 10b5-1 trading plan to plan his sale of Pfizer shares. The United States Securities and Exchange Commission (SEC) established trading plans under Rule 10b5-1 in 2000 to give company insiders a way to buy or sell a predetermined number of shares. at a predetermined time. The reasoning behind setting up this type of trading plan was to actually allow insiders to trade in the stock market without the appearance of insider trading.
It’s just a coincidence that this particular sale of shares by Bourla happened on the same day as the big story about Pfizer’s COVID-19 vaccine candidate results. The independent data monitoring committee for the advanced BNT162b2 study monitored when the interim analysis would be performed and when the results would be shared with Pfizer.
Many business leaders use the 10b5-1 rule trading plans. For example, Modern This year, CEO Stéphane Bancel carried out several stock market transactions that were scheduled well in advance. It is a common practice which is not limited to a single sector.
Don’t follow the leader
Obviously, any outrage over the sale of Bourla shares is not a problem. However, the bogus controversy raises a good question for investors: With the CEO of Pfizer selling the shares, should you also be selling the shares?
First you should know that Bourla still owns almost $ 3 million in Pfizer shares. He certainly hasn’t completely bailed out.
More importantly, Pfizer’s momentum is probably just beginning. The company is expected to have another major security data announcement next week for BNT162b2. The announcement could pave the way for Pfizer and BioNTech to file with the Food and Drug Administration an Emergency Use Authorization (EUA) for their COVID-19 vaccine. When partners obtain EUA for BNT162b2, they will receive $ 1.95 billion from the US government to deliver 100 million doses of the vaccine.
The sale of Pfizer shares by Albert Bourla was totally on the rise. But this is a great example of when you shouldn’t follow the leader.
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