CEOs and corporate insiders have sold a record $69 billion in stock in 2021, as looming tax hikes and lofty share prices encourage many to take profits.
From Satya Nadella at Microsoft to Jeff Bezos and Elon Musk, CEOs, founders and insiders have been cashing in their stock at the highest pace on record. As of Monday, sales by insiders are up 30% from 2020 to $69 billion, and up 79% versus a 10-year average, according to InsiderScore/Verity, which excludes sales by large institutional holders.
The selling is likely to increase even more as December is often an active month for sales due to tax planning.
While some market watchers see insider selling as a warning sign and signal of a market top, many of the stocks sold by the insiders — including Tesla and Amazon — have continued to surge after the selling. And most of the stocks were sold as part of prescheduled selling plans, known as 10b5-1 programs.
The bulk of this year's sales have been highly concentrated among a few large sellers, including Musk and Bezos, who each sold around $10 billion in stock this year. Ben Silverman, director of research at InsiderScore/Verity said the top four "super sellers" — Musk, Bezos, the Waltons and Mark Zuckerberg — account for 37% of this year's total.
"The increase in the dollar value of insider sales in 2021 can be attributed to multiple factors, with historically high stock valuations being the primary driver," he said. "The presence of 'super sellers' during the period has help pump up sales total."
Musk sold another $1.05 billion in Tesla stock last week as part of his options exercise and tax payments. His sales since his famous Twitter poll on Nov. 6 now total $9.85 billion, with about half for options-related taxes and the rest for a straight cash-out.
Jeff Bezos sold a total of $9.97 billion in Amazon stock this year. While his activity is roughly in line with his stock sales last year, they are four times larger than his sales in 2019 and far higher than his sales of $1 billion a year in earlier years. Filings with the Securities and Exchange Commission show the sales are part of a 10b5-1 plan.
The Walton family has sold $6.18 billion in Walmart stock this year through their family trust and investment vehicle. The family sells shares periodically to maintain their ownership levels and to fund their philanthropic efforts. Mark Zuckerberg has sold $4.47 billion in Meta stock this year as part of a 10b5-1 plan. Google founders Larry Page and Sergey Brin have each sold about $1.5 billion of their Alphabet shares as part of 10b5-1 plans.
Beyond the scheduled selling programs, however, taxes and high valuations are also fueling the sales. Microsoft CEO Satya Nadella sold off nearly half of his Microsoft shares last month for about $285 million. The company said in a statement that the sale was for "personal financial planning and diversification reasons."
But Nadella will also save on taxes by selling now rather than next year. Starting Jan. 1, the state of Washington will impose a 7% tax on capital gains over $250,000. Nadella could save up to $20 million in state taxes by selling ahead of the tax hike. Bezos could save up to $700 million in Washington state taxes because he sold before January.
Federal taxes are also likely to increase for high earners, leading some CEOs to cash in to avoid the hikes. The House has proposed a new 5% surtax on income over $10 million and 8% on income over $25 million.
"Potential tax rate and code changes at the federal and state level are likely a motivator for some sellers," Silverman said.
Perhaps the biggest factor driving up the sales total, however, is high stock valuations. Adam Aron, the CEO of AMC Entertainment, which is up more than 1,500% this year, sold 625,000 shares of AMC stock last month for about $25 million. He plans to sell a total of 1.25 million shares as part of what he told investors on an earnings call was "prudent estate planning" given the "potentially soaring capital gains tax rates and significant changes to what can be passed on to one's heirs."
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