The stock prices of GameStop, BlackBerry and other companies that generate “YOLO” pay days for some members of Reddit Wallstreetbets Forum they are also gaining benefits for people with inside information.
As of Jan. 1, BlackBerry and GameStop executives have been selling shares, charging a total of more than $ 22 million in shares. Lately, they have also received a big boost from the collective of social media enthusiasts who have offered non-stop the actions of companies and at least some of whom have declared their mission to divert profits from Wall Street to Main Street .
There are no allegations of improper insider trading related to any of the transactions. And several experts told CBS MoneyWatch that they see no evidence that any of the entrepreneurs and executives who recently sold GameStop and BlackBerry shares have done anything wrong.
Still, a person familiar with stock sales told CBS MoneyWatch that GameStop has moved in recent days to restrict executives and privileged people from selling additional shares.
Executives and insiders have come out at the same time as Wallstreetbets participants have pushed their members to recoup the shares. Robinhood, a popular trading app among Wallstreetbets investors, this week temporarily banned traders to Buy More GameStop Stocks | The ban was partially raised Friday.
Executives tend to trade stocks through default plans to avoid any appearance they might have traded in inside information, which is illegal. But business notes from recent filings that executives filed with the U.S. Securities and Exchange Commission do not indicate that recent stock sales on both BlackBerry and GameStop occurred through these so-called 10b5- 1. This suggests that none of the operations had been scheduled in advance.
“Pay for luck”
Perhaps more importantly, stock options and other stock grants are supposed to align executives with other investors; in short, corporate leaders are supposed to be paid for their performance in creating long-term viable businesses. Still, delving deeper into what many see as reckless social media-driven speculation highlights issues of how senior executives are compensated, experts told CBS MoneyWatch.
“You get paid for luck,” said Benjamin Golez, an associate professor of finance at Mendoza College of Business at the University of Notre Dame.
Last week, three BlackBerry executives cashed in the company’s shares worth $ 1.7 million. One of the executives, BlackBerry Chief Financial Officer Steve Rai, sold all of his shares in the company, although he has not invested in options that could become shares in the future.
BlackBerry shares were trading at about $ 5.50 before becoming the feed of the conversation on the Wallstreetbets message board. At that price, the shares of the three executives would have been worth about $ 700,000. But the frenzy that followed Wallstreetbets added $ 1 million to the combined value of its shares.
The Wallstreetbets insurgents could lead to an even bigger advantage for BlackBerry CEO John Chen. Under his compensation package for joining the software company in 2018, Chen could receive a one-time $ 90 million cash bonus if BlackBerry shares are traded above $ 30 for 10 consecutive days in any moment before the end of 2026.
On Wednesday, shares of BlackBerry, which has lost more than $ 800 million in its last four reported quarters, approached that magic number of $ 30, reaching $ 25, though they have since fallen back to approximately $ 14.
BlackBerry did not respond to a request for comment on executive stock sales. But a BlackBerry spokesman told the Wall Street Journal that executives had sold their shares during a window where operations were allowed.
$ 20 million richer
The bank accounts of four troubled retailers GameStop have also benefited from Reddit attacks. GameStop has lost nearly $ 1.6 billion in the last three years. Its sales have recently dropped by 30% and they are closing 1,000, or about 20%, of all their stores. Still, the company’s shares rose from about $ 17 earlier this year to $ 315 on Friday.
Since the beginning of the year, four GameStop board members have taken away $ 20 million selling shares of the company. One of the vendors was Kurt Wolf, a money manager and former executive consultant who joined GameStop’s board of directors last year. Hestia Capital, Wolf’s investment fund, discharged more than two-thirds of its stake in GameStop in January, bringing in Wolf and its clients just over $ 17 million.
GameStop did not return requests for comment on executive stock sales. Wolf, through a spokesman, declined to comment. A document filed with the SEC states that Wolf sold in order to diversify its holdings in funds.
Thomas Gorman, a partner at law firm Dorsey & Whitney and a securities expert who spent seven years with the Securities and Exchange Commission, said that if he were advising the boards of companies whose shares have been offered by Wallstreetbets merchants, I would say. asking executives to refrain from selling while stocks seem artificially high.
But Gorman also stressed that executives selling shares do not violate any rules. Business boards have no capacity to prevent executives from being sold into a sudden action, as long as the profits are not related to inside information.
“This is outside information,” he said.
The problem is that stock compensation involves aligning executives with the corporation’s broader fortune. In the case of GameStop and BlackBerry, executives and insiders seem to benefit from the frantic speculation of corporate stocks, not any real improvement in their business.
“Councils can use their pulpit and tell their executives that it’s not really a smart time to charge for their shares,” Gorman said. “But that doesn’t mean executives, who are sitting in all this stock, are listening.”