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Soaring stock prices for GameStop, BlackBerry and other companies are generating “YOLO” paydays for some members of Reddit Wallstreetbets Forum also earn a bargain for corporate insiders.
As of Jan. 1, executives at BlackBerry and GameStop have been selling shares, collecting a total of more than $ 22 million in shares. Lately they’ve also received a major boost from the cowardly collective of amateur social media traders who have continually offered deals on company stocks and at least some of whom have said their mission is to hijack them. profits from Wall Street to Main Street. .
There is no allegation of abusive insider trading related to any of the transactions. And several pundits told CBS MoneyWatch that they saw no evidence that insiders and company executives who recently sold shares of GameStop and BlackBerry did anything wrong.
Still, a person familiar with stock sales told CBS MoneyWatch that GameStop has taken the past few days to prevent executives and insiders from selling additional stock.
Executives and insiders withdrew as Wallstreetbets participants pushed their members to appropriate the stock. Robinhood, a popular trading app among Wallstreetbets investors, this week traders temporarily banned to buy more GameStop shares. The ban was partially up on Friday.
Executives tend to trade stocks through predefined plans in order to avoid any appearance that they might have traded on inside information, which is illegal. But transaction notes in recent filings that executives have submitted to the United States Securities and Exchange Commission do not indicate that recent share sales at both BlackBerry and GameStop have taken place as part of these so-called 10b5-1 plans. This suggests that none of the exchanges had been scheduled in advance.
“Pay for luck”
Perhaps more importantly, stock options and other equity awards are supposed to align executives with other investors – in short, corporate executives are supposed to be paid for their performance in building viable businesses. long-term. Still, capitalizing on what many see as reckless social media-driven speculation highlights issues with senior executive compensation, experts told CBS MoneyWatch.
“This is luck,” said Benjamin Golez, associate professor of finance at the Mendoza College of Business at Notre Dame University.
Last week, three BlackBerry executives cashed in nearly $ 1.7 million in the company’s stock. One of the executives, BlackBerry CFO Steve Rai, has sold all of his shares in the company, although he has unvested options that could turn into shares in the future.
BlackBerry shares were trading at around $ 5.50 before becoming the fodder of conversation on the Wallstreetbets bulletin board. At that price, the shares of the three executives were worth approximately $ 700,000. But the ensuing frenzy, driven by Wallstreetbets, added $ 1 million to the combined value of their shares.
Wallstreetbets insurgents could trigger an even bigger windfall for BlackBerry CEO John Chen. As part of his compensation package for joining the software company in 2018, Chen could receive a one-time cash bonus of $ 90 million if BlackBerry shares trade above $ 30 for 10 consecutive days at any time. before the end of 2026.
Shares of BlackBerry, which have lost more than $ 800 million in the last four reported quarters, on Wednesday moved closer to that magic number of $ 30, hitting $ 25, although they have since fallen to around $ 14. .
BlackBerry did not respond to a request for comment on sales of executive shares. But a BlackBerry spokesperson told the Wall Street Journal executives sold their shares during a window in which transactions were allowed.
$ 20 million richer
The bank accounts of four administrators at struggling retailer GameStop have also benefited from Reddit raiders. GameStop has lost almost $ 1.6 billion in the past three years. Its sales recently fell 30% and it is closing 1,000, or about 20%, of all its stores. Still, the company’s shares fell from around $ 17 at the start of the year to $ 315 on Friday.
Since the start of the year, four members of GameStop’s board of directors have pocketed $ 20 million by selling shares in the company. One of the vendors was Kurt Wolf, a finance manager and former executive consultant who joined GameStop’s board last year. Hestia Capital, Wolf’s investment fund, offloaded more than two-thirds of its stake in GameStop in January, earning Wolf and his clients just over $ 17 million.
GameStop did not return requests for comment on its sales of executive shares. Wolf, through a spokesperson, declined to comment. An SEC filing indicates that Wolf sold in order to diversify his holdings of funds.
Thomas Gorman, a partner at Dorsey & Whitney law firm and an expert in securities law who spent seven years at the Securities and Exchange Commission, said that if he advises the boards of directors of companies whose shares have been bought by Wallstreetbets traders, he would say so. to ask executives to refrain from selling until the stock seems artificially high.
But Gorman also pointed out that executives who sell stocks don’t break any rules. Boards do not have the capacity to stop executives from selling in a sudden rush, provided the gains are not tied to inside information.
“This is outside information,” he said.
The problem is, stock compensation is supposed to align executives with the larger fortunes of the company. In the case of GameStop and BlackBerry, executives and insiders appear to benefit from the rampant speculation on corporate stocks – not from a real improvement in their business.
“Boards can use their chair of intimidation and tell their executives that this really isn’t a smart time to cash in on their stocks,” Gorman said. “But that doesn’t mean these executives, who are sitting on all this stock, are going to listen.”
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