As eBay's Stock Soared, Insiders Sold

Updated from 7:12 a.m. EDT

eBay (EBAY) insiders have been selling the company's shares at a torrid pace this year, even as institutional investors have rushed in to buy.

In the first five months of this year, 10 eBay directors and executives sold 1.7 million shares, a little more than 0.5% of the outstanding shares, at the beginning of the year, according to data compiled by Vickers. In the process, those insiders realized more than $116 million in gains from those sales. During that period, eBay shares rose more than 40%.

Topping the list: eBay CEO Meg Whitman, who realized some $57.3 million through the sale of about 685,000 shares. The stock sales represented about 9% of the stock held by Whitman at the beginning of the year.

Overall stock sold by the eBay insiders in the first half of the year was up about 6% over the same period last year. But the estimated value they realized from those sales was up an estimated 54% over the first half of last year.

Insider stock sales are not necessarily a red flag, said Gary Lutin, an investment banker and corporate governance critic. But the sales are something that investors should investigate, he said.

"You certainly need to find out what's behind it," Lutin said. "The most likely thing is that people are nervous and think the share value is inflated."

eBay representatives did not return calls seeking comment about the stock sales. However, they have said in the past that executives and directors at the Internet auction giant sell shares on a regular basis to diversify their portfolios.

Insider Sales at eBay Stock sales by eBay executives and directors from Jan. 1 through May 20.
Name	Position	Shares Sold	Portion of Holdings	Minimum Value Realized
Meg Whitman	CEO	685,000	9%	$57,330,150
Maynard Webb	COO	200,000	38.1	8,380,800
Pierre Omidyar	Chairman	150,000	0.2	14,186,750
Dawn Lepore	Director	116,250	62.4	2,477,785
Jeff Jordan	SVP	80,332	11.6	3,233,536
Scott Cook	Director	200,000	21.3	16,195,000
Bill Cobb	SVP	42,500	13.3	1,887,225
Matt Bannick	SVP	141,715	30.3	5,056,848
Rajiv Dutta	CFO	60,000	N/A	2,640,300
Mike Jacobson	SVP	70,000	N/A	5,008,800
Total		1,745,797		$116,397,194.00
Notes: Sales as a portion of holdings are based on estimated holdings as of 12/31/02. Sales by everyone but Whitman and Omidyar were of options. Whitman's sales include those made by a trust fund. Value realized is estimated; where sales were of options, sellers often gave a range of strike and sales prices. Sources: Vickers, company SEC filings.

The insider sales at eBay have come as growing numbers of institutional investors have bought up the stock. In the first quarter, mutual, index and pension funds increased their net holdings in eBay by about 11.8 million shares, a stake now worth some $1.2 billion. Those purchases have helped send eBay's stock price up more than 50% for the year.

The sales also come amid growing scrutiny of eBay's compensation practices. On Thursday shareholders approved a greater than 50% increase in the amount of shares eBay can grant under its current stock options plan. Investors have approved similarly large increases in eBay's options pool in each of the past two years.

The proposal to increase its available options has proven controversial because eBay has been a prolific dispenser of options in recent years.

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