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

by mirthlessend • 3 years ago

20 16 3 years ago

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.

pwinnski2• 3 years ago

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.

kevinventullo• 3 years ago

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.

cma• 3 years ago

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.

dragontamer• 3 years ago

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.

-----------

What we're concerned about are executives protecting themselves, while screwing over their companies and/or depositors.

paulpauper• 3 years ago

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.

paxys3• 3 years ago

I wish this would stop being the default headline whenever any such scandal happens. It's low-effort and provocative, but ultimately meaningless. CEOs and other executives are always selling company stock, because the vast majority of their compensation happens via stock. People want to spend money and/or diversify it in other investments. There's no reason for anyone to hold a significant amount of vested company stock.

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.

noncoml• 3 years ago

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.

kjksf• 3 years ago

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.

xboxnolifes• 3 years ago

No, it means you're smart enough to know what risk is.

paxys3• 3 years ago

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.

radicaldreamer• 3 years ago

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.

metadat• 3 years ago

https://archive.today/w9XBM

First Republic Bank Executives Sold $12M in Stock in Months Before Crash

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