Ever since the Enron scandal broke in 2001, stockholders sit up and take notice when a high-ranking official of a large company sells a huge amount of shares. These officials know more about their company and its projected future than most people do, and if they’re selling off millions or billions of dollars worth of their shares in their company, stockholders want to know why.
It was announced recently that Google Inc., Chairman Eric Schmidt plans to sell $2.51 billion of his stock in the company, which translates to about 3.2 million shares of his Class A stock. This is on top of the 1.8 million shares he sold in 2012 and the 300,000 shares he sold in 2011.
Of course, just because chairmen or CEOs of large companies sell significant amounts of shares in their companies, that does not mean that their companies are involved in any wrongdoing that is soon to be exposed, as was the case with Enron. It’s possible that they believe the value of the company’s stock is close to maxing out and just want to get out while the getting is good. Or they might have other reasons for their actions. But Market Watch is reporting that CEOs and CFOs at a number of large companies are selling their stock “at an alarming pace.”
Who gets hurt when companies lose a significant portion of their value? The average stockholder, that’s who! People can’t get a decent return on their investment in other areas, so they choose the stock market. But they don’t have inside information about these companies that CEOs do, and so they’re left holding the bag when the company starts to tank while company officials who sold their stock are sitting pretty.
In other words, the rich folks get the gold mine and the common man gets the shaft.
You can read more about the Google story here.
Why do you suppose the chairman of Google, as well as high-ranking officials at a number of other companies, are selling so much of their stock in their companies? Do you think they’re concerned about the future of their companies in particular, or do you believe they’re sensing an overall market crash in the near future?
How about you? Are you uneasy about your investments due to the state of the economy or the direction the country is heading? Let me know what’s on your mind about these issues.