Ballmer sells 20% of his MSFT holdings | Hacker News Reader

Ballmer sells 20% of his MSFT holdings

seattlepi.com

29 points42532 comments

He was most likely waiting on the final results of on Washington State's income tax initiative, which would have cost him millions had it passed:

http://www.ballotpedia.org/wiki/index.php/Washington_Income_...

He sold 12% of his MSFT shares, not 20% like stated in the title: 49.3 million shares out of a total of 408 millions that he owned (SEC link: http://sec.gov/Archives/edgar/data/789019/000119309910000081... ).

He said he might sell more by end-year, but didn't guarantee that he'll do that ("He said he plans to sell as many as 75 million shares by year's end"). That would bring his sale percentage up around 18.3%.

Hmm, I see a few posts defending this move because of tax implications, putting the cost at $65,000,000 if he waits around for the 20% tax bite.

Seems like a pretty big bet that the value of MSFT won't increase by... eh... 70 cents?

IMHO very good time for sale: few days after record revenue announce.

He could've done even better by announcing his resignation and then selling on the Fiorina-like bounce it would have engendered.

to me it sends the wrong signal to other share holders. Sell now while the share has a temporary peak.

their up and coming smart-phone business and being able to integrate that with their other online products like Bing will decide whether MS will grow or die. They are late in all domains, so they are gonna have to impress by pushing the experience to new heights.. which I doubt they will pull off considering they have a poor product development culture compared to apple and google.

I believe the main reason why MSFT is stagnant is that the biggest shareholder (Bill) is selling this stuff constantly. His must have sold tens of billions of MSFT is the last few years. It is just the inverse of a company like IBM that is actively buying shares.

According to http://www.google.com/finance?q=msft , 1% of Microsoft shares changes hands each day. This means that every 3 months, on average, every Microsoft share changes hands once.

Bill's selling represents less than 100% and occurred over a decade, which is a much larger time interval. Nowadays mutual/hedge funds look at the company performance (earnings) and at the stock price and effectively pour in the capital whenever the P/E ratio drops below their threshold, thereby effectively compensating the effect of those sales.

When 1% of a company's shares changes hands each day you can't really blame Ballmer for stock price fluctuations.

In regard to IBM, when a company buys back its shares it effectively reduces the number of outstanding shares on the market (and thus it increases their rarity and therefore their price), but the money used for the buy-back could have been instead paid in dividends or used for an external acquisition. It is a management decision that partially says "we didn't find anything else better to do with the money than this", but it's too complex to be analysed in a comment's paragraph. The Ballmer transaction is on the market, investor-to-investor; it doesn't change the number of outstanding shares nor does it dilute the price.

> 1% of Microsoft shares changes hands each day

yes, but these are transactions that follow the pattern of the market. Usually they even out, with a few days having more sellers and on other days more buyers.

When you have a share repurchase program, you are basically giving a support for the market. It is hard for the stock to go much lower, because the company is always buying.

Bill and Ballmer, on the other hand, are selling shares. This is not good for the stock, even if spread over a long time.

The point is that lots of other people are selling shares too - by the numbers, several times more than Bill and Ballmer. Yet nobody cares much if say, Fidelity or Vanguard or Goldman Sachs is selling.

In a liquid market, somebody is always selling. And somebody else is buying. In order to have a transaction, you have to have both a buyer and a seller. As long as those balance out, the price remains stable. You only see wild swings in price when there are suddenly many more sellers than buyers, or several more buyers than sellers. That doesn't happen with these planned insider transactions, because as soon as a sale is announced, a dozen computerized arbitragers swoop in to buy up the shares they've just sold (as long as the market doesn't consider the insider sales to be a vote of no confidence in the stock).

When you have a share repurchase program, you are basically giving a support for the market. It is hard for the stock to go much lower, because the company is always buying.

This statement shows a common misunderstanding of finance.

The market cap of a company represents the market's best estimate of the value of that company. When a company does a share buy-back, the company loses money and destroys stock. The current value of the money used matches the value of the stock destroyed, and so the market cap should be reduced by the amount of stock destroyed. Therefore to first order effects, the result is that the share price should remain constant. (There are second order effects where some value is transferred from stock holders to option owners, which indicates that the share price should go down.)

But to be fair, this is the only thing that makes sense for him to do: if your portfolio tilted into one company like his, you should diversify like crazy irregardless of company performance, otherwise one day you can find yourself unexpectedly and significantly poorer.

I don't think the DAY matters; as I understand it, sales by such insiders have to be filed weeks in advance.

This move is a little strange. It's a big chunk to sell all at once and some will interpret it as a de facto vote of no confidence in MSFT.

The smoother way for executives to sell their substantial holdings in a company is to say they will sell X shares per year for Y years (typically in the name of diversifying one's holdings) and then put some independent third party (with no access to insider information) in charge of the exact timing of the individual transactions.

The insider selling to buying ratio has been over 2000 in recent weeks. This is likely less of a dire sign of MSFT's prospects than it is a condemnation of the US economy after Heli Ben's QE2.

I bet he pumps it into commodities, metals and markets like brazil that aren't devaluing their currencies.

Why do you think metals, Brazilian markets etc are a better store of value than MS stock? Why would you expect QE to affect MS stock as a store of value? In what circumstances would MS stock intrinsic value decrease but world commodity prices hold up, if not a business failure of MS itself?

MSFT is not immune to economic downturn especially a crash called by a currency crisis. The FED is currently walking a currency crisis tightrope.

As for value stores, look at the performance of the Brazilian market over the last few years and gold and silver.

Worse, if we have a currency crisis here the entire equities market is toast. The people who called this depression (Schiff, Denniger, etc) are calling for a currency crisis due to the fed's actions.

To be honest, a devaluing currency is precisely what you want to invest in a country, as it makes exports from that country way cheaper.

That's the 10,000 foot view of an entire economy, not a man trying to peg the top of an artificially inflated market.

Yeah, because nothing says "I condemn the devaluing of this currency" like asking for 1.5 billion of it right as said devaluing is happening.

So you think because he sold his stock he has to keep the dollars he got for it?

So you think because he can turn around and buy something else with the dollars he just got, he's not taking a risk by passing through an actively devaluing currency?

If you were afraid of a falling dollar how long would you keep your assets in dollars?

Well, he'll be saving $65M in capital gains taxes by selling this year before the rate increases to 20%. No doubt that was a consideration.

Not if he invests in other stock that he could sell afterwards.

Microsoft is less secretive about new products than a company like Apple, and with such large fairly constant revenue from things like Windows and Office, the shipment or degree of success of their other products doesn't seem likely to be that big a factor in near future price of the stock. External market conditions, like the state of the economy and trends with competitors seem to matter much more. The short term impact of Win phone 7 will be more one of mood than the bottom line. They're competing with a free smartphone OS limiting licensing revenue and it would take a substantial market share for search/ad revenue to matter much. Without a huge pool of touch apps and trained users, any non-desktop-binary running tablets would see a much slower adoption rate than the iPad is experiencing and even then what they could get would only capture a small slice of the selling price. And not really being something new, it's hard to see much in the way of surprises from licensing revenue for tablets that are Windows-desktop binary compatible. It seems the innovation there won't be from MS, but primarily from lower power Intel chips making them more viable. And even then, to be hugely popular with consumers, they'd have to be at a not so profitable price point. They'd also be mostly cannibalizing netbook/laptop sales to users bonded to Windows.

The sales don't seem likely to be tied to insider info, but may be viewed as an admission of agreement with the ho-hum view of most outsiders.

I'm no expert, but this just screams doom to me. When someone inside the company sells their shares in this quantity it's _always_ before something big. I won't speculate at what is going on inside, beyond all the negative image lately, but it can't be good.

And if he wanted to diversify his portfolio then he should buy some APPL! (Laughed at my own joke, too.)

It doesn't scream "doom" to me; Ballmer's sale looks like it was done mostly for tax purposes.

It still sounds bad to me. It says to me that Steve thinks there's more upside in lower cap gains taxes than hanging onto the stock. In other words, MSFT is stagnant now and it's going to be stagnant for years to come.

If Steve had been doing what Bill does—selling off a big chunk of stock every quarter—no one would've even blinked at this.

Some reports put Balmer's total sale at $1.3 billion. The 5% increase in the capital gains tax rate represents up to $65,000,000. Even for a billionaire, that's real money.

I'm assuming that what you're describing is not the case. Selling because you know that something big is about to happen is insider trading.

it screams QE2 to me

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