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Image via WikipediaMake Money Blog$; General Motors stock has languished since the company went public last November after its government-led bankruptcy.
But chief executive Dan Akerson is gambling that the stock will rise, spending nearly $1 million this month to buy 30,000 shares of GM on the open market. His current GM holdings are worth about $1.6 million, though he’s also got restricted stock that could be worth another $1. 7 million after vesting.Over at Ford Motor, which avoided a government bailout, it’s a different story. Ford Motor stock, currently about $15, has tripled in the past two years, and three-quarters of the analysts who follow the stock have a “buy” recommendation, and expect it to go to around $20, according to Bloomberg. The rest are neutral or recommend holding it.
Yet many Ford executives have decided now is a good time to take their money off the table. Many have cashed in stock options for a handsome profit, or sold shares on the open market. In the past two years, they’ve exercised options to buy $105.7 million worth of Ford stock, but sold shares worth about twice that much, or $210.5 million.
The last time a Ford insider bought shares on the open market was in June 2009, about a week after its rival GM had filed for bankruptcy and the entire industry was in turmoil. On June 8, Director Homer Neal, a professor at the University of Michigan, bought 7,491 shares at $6.42 per share, or about $48,000. The last Ford executive to buy shares in the company was Cheng Mei Wei, who bought 50,000 shares at a price of $4.47 per share in August 2008 shortly before he retired as head of Ford China.
More typical is the Ford officers who exercised options to buy stock at a discounted rate as part of their annual compensation package, then turned around and sold the shares immediately. On May 16, for instance, group vice president James Farley, Ford’s global sales and marketing chief, exercised an option to buy 130,000 shares for $1.96 per share, then sold them the same day for $15.93. His one-day profit: $1.7 million.
Farley’s big payday came a few days after chief executive Alan Mulally pocketed $1.7 million of his own by cashing out Ford options in a similar transaction.
Such transactions aren’t uncommon, especially at a company like Ford where executives’ annual compensation is increasingly stock-based to align their interests with those of shareholders.
In other cases, however, Ford executives have used the exercising of options as a good opportunity to sell additional shares.
Last August, for example, Executive Chairman William Clay Ford Jr. exercised 1.8 million options, but sold 3.5 million shares, netting $28.5 million. The same day, his cousin Edsel Ford II, a director, sold 179,000 shares on the open market, worth $2.3 million. A month earlier, Farley sold 24,728 shares on the open market for $316,518.
Group Vice President J Mays, Ford’s chief designer, sold about $1.3 million worth of Ford stock in three transactions over the past year or so. He still owns 99,586 shares, worth $1.5 million, not including 24,802 shares held for him in a company plan.
Other sellers are Bennie Fowler, group vice president for quality, who in October 2010 sold 8,000 shares for $13.04, or $104,320, and Joe Hinrichs, group vice president for Asia, who sold 21,499 shares for $245,088 in January 2010.
Does this mean Ford executives have less confidence in the automaker than Wall Street does? Not necessarily. A Ford spokesman points out that there are many reasons — buying a home, for example, or preparing for college or retirement — that executives might choose to sell shares in the company, especially because more of their annual compensation is now equity-based in an effort to encourage them to focus on long-term objectives. “These are personal financial decisions and our executive officers continue to have sizable holdings,” said spokesman John Stoll.
As a group, Ford directors and senior executives owned 57 million shares (1.54%) of Ford common stock or equities convertible to common stock as of February 1. Most of these were acquired through various equity-based elements of their annual compensation.
Since 2004, executives at or above the vice president level have been assigned stock ownership goals by Ford’s board of directors. Mulally’s goal, for example, is five times his annual salary, or $10 million worth of stock. He currently owns 2.7 million shares, or about $42 million in stock, well in excess of the ownership guidelines. (GM does not have a similar stock ownership goal for its executives.)
“The stability of our management team underscores their confidence in on our plan and our continued progress,” Stoll added.
source: forbes.com
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