Updated from 7:12 a.m. EDTeBay ( 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|
|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
Many investors charge that the wide use of options encourages short-term thinking and illegal accounting gimmicks by management and overly dilutes their holdings.In response, regulators are likely to force all companies to expense the cost of options; currently, companies can hide option costs in a footnote in their quarterly reports. Some companies such as eBay rival Amazon.com ( AMZN) already have begun to voluntarily expense the cost of stock options. Meanwhile, other companies, including Intel ( INTC) and Yahoo! ( YHOO), have begun to curtail their use of options. eBay neither expenses stock options nor has moved to curtail their use. Calling eBay's options grants "excessive" already, the California Public Employees Retirement System, the nation's leading public pension fund, has said it will