The past two months have overall been definitively positive for the broad market, with the S&P 500 gaining 5.5% since October 1. While this is impressive, technology has far led the recent bull run, with the Nasdaq-100 up 7% over that same period.
It appears now, that multiple tech CEOs are cashing in on the elevated valuations. (See Insiders’ Hot Stocks on TipRanks)
Satya Nadella, CEO of Microsoft (MSFT), sold nearly half his equity in the $2.52-trillion company. According to TipRanks, the CEO transacted 838,584 shares for a total market value of $285,333,422.06.
Corporate Insiders, defined as any individual with over 10% stake in a company, in a senior officer role, or on a board of directors, may sell shares for any reason. Although an Informative Sell type transaction is not necessarily an indicator of future downside, this particular action is certainly notable. It is not every day that the CEO of a major company sells half of his holdings.
Perhaps it isn’t downside that Nadella wanted to capitalize on, and instead the huge gains the stock has made of late. Year-to-date, MSFT is up about 52.6%, about two-fifths of which has occurred since the beginning of October.
The executive took the helm of Microsoft in 2014, and has led the company through a structural shift in business toward cloud-computing and enterprise solutions. Moreover, the stock has risen over 800% since he was instated in early 2014.
Another possible hypothesis for why he decided to make this sale could be the upcoming change in tax code. On January 1, 2022, the State of Washington will levy a 7% tax on long-term capital gains worth more than $250,000.
As we approach the new year, perhaps Nadella wished to take home as many of his profits as possible. It is important to add, however, that Nadella is not alone in his actions.
He is hardly the only high-profile CEO selling stock as of late, with Tesla (TSLA) CEO Elon Musk moving about $7 billion in equity off his books in mid-November. The unorthodox executive took to Twitter (TWTR) to poll his followers on whether or not he should sell stock. However, it was not necessarily an inopportune time for him to do so, as the stock had risen about 35% in the two months preceding his transactions.
For now, Microsoft’s investors have digested the news.
Disclosure: At the time of publication, Brock Ladenheim did not have a position in any of the securities mentioned in this article.
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