Pfizer's CEO sold $5.6M in stock on same day of vaccine news
axios.com
axios.com
It is 'not illegal' to time an announcement to benefit yourself if you have a 10b5-1 plan in place that automatically sells your stock on a fixed schedule. It's 'not illegal' in the sense that as long as you don't admit you did it, there's really no way to prove it and there's no legal framework for prosecuting you anyway. Lawyers call it 'disclosure timing' and it's one of those often-whispered-about loopholes for the rich.
No one admits to disclosure timing, but we all know that it is happening. We know this because on average trades made under 10b5-1 plans get better returns than trades not made under those plans. [1]
The law is full of ways for rich people to get richer if they have good lawyers. This is one of them. There's not much incentive to change it either - it is hard to prove, it is complex to explain to the public, and the kinds of people that benefit from it are the kinds of people in power.
One of the suggested routes to make the market more fair is to require those with 10b5-1 plans to make their scheduled trade dates public. This would at least give the market at way to guess at disclosure timing too. But again, there's no real political incentive to do this right now.
[1] https://clsbluesky.law.columbia.edu/2016/03/30/the-legality-...
NB: I'm not a lawyer, so obviously don't do anything based on this dumb internet comment.
Then why is this news.
Maybe there should be a new regulation: No major announcements may be made which directly impacts stock price X% before X months of the predetermined sales date.
As for the announcements one usually has to announce before the transaction is made (again compliance reasons) but then you don’t want to wait because the price tends to move against you with such announcements. This is why the real trades were likely executed just seconds after the announcement.
So if you hold 100 million shares valued at 1 USD/share, and sell 1 million at 2 USD/share, your tax liability will be assumed on you selling 100 million shares at 2 USD/share (or 200 million of regular income).
With respect to your example, it's exactly the same point and IMO easier to follow if you remove all instances of the word "million."
You can time announcements to make the price go up before you sell or go down after you did.
If you, as a CEO looking ot maximise personal profit, know a sale order data is coming up then you postpone or bring forwards the announcement to maximise the potential for that sale.
But if you control the date of the announcement to line up with instructions in your 10b5-1 plan, that would probably look more like insider trading despite the plan.
So you could totally abuse the system by submitting 5 of them, designed to allow for different strategies, then cancelling some of them to pick specific trading strategies based on more recent insider info.
And this works: cancelling them is normal, so that won't even attract much attention. It's a matter of executing well on this loophole.
I'm guessing that the sharp stock price rise caused by the announcement triggered the sale based on these predetermined metrics, as it was meant to be.
That is to say, this is a non story and the article only tries to whip up controversy where there is none.
All CEOs are given stock-based compensation and incentives, and virtually all of them setup these sale plans in order to be able to sell legally and above board.
So again this is a non story.
[1] https://www.reuters.com/article/us-switzerland-hildebrand-id...
That is insider trading, and directly profiting/stealing from the capital that belongs to the swiss peoples.
AND
>Hildebrand admitted the scandal had revealed shortcomings in the SNB’s internal regulations and code of conduct.
So he self knew that it's not right to do that, he's not a normal President but the one from the Swiss national Bank. No one wants someone like that in such a position.
AND
>Christoph Darbellay, the Christian Democrat chairman of parliament’s economic committee that Hildebrand addressed, said it would push the SNB to tighten its rules. “People who can have an influence on the currency should keep their hands off,” he said.
But selling AFTER an announcement when the stocks are up is... what any shareholder would do and would be allowed to do.
Also, the article mentions it was a 10b5-1 plan. Typically that means he is precommitted to sell stock on a predetermined schedule, and had no choice but to continue selling this stock on this day as planned.
https://www.statnews.com/2020/11/09/covid-19-vaccine-from-pf...
Oh how easy. All he should have known in advance is that cruise lines and zoom stocks will move more than Pfizer. So strange that he decided not to do that when it is so obvious before the event.
That’s not the bet. Pfizer is irrelevant because he can’t bet on Pfizer’s stock. He just needs to pick stocks in an industry killed by covid. That’s not hard.
The same pattern has played out on every major vaccination news. Airlines, cruise ships, Disney, etc rally.
I find hard to believe he would risk an insider trading lawsuit over this amount, so my conclusion is that this was simply a prescheduled transaction. Have in mind that the increase will stick around for some time (stock still up ~8% since last week) so he would have benefitted anyway selling many days afterwards, or even weeks.
If a bank robber only manages to get away with 100 dollars because the register is low, you wouldn’t come out defending him saying “well the claim is he only stole 100$, and obviously no one would care about such a small amount, so we can conclude that he didn’t actually try to rob the bank”.
https://www.fiercepharma.com/pharma/pfizer-new-boss-bourla-n...
Anything else effectively makes them a lower-class shareholder.
Pfizer is a huge, multi-billion dollar business. The CEO making $5M off a stock sale is relatively minuscule, especially after delivering such a massive win for shareholders.
Corona Daily 271: Pfizer Vaccine – Celebrate with Caution
In an earlier chapter on the vaccine race, I wrote: God forbid Pfizer wins the race. God answered my fears. Yesterday, Pfizer announced with aplomb a 90% effective vaccine. Editors changed headlines, stock markets vaulted, people made new Christmas plans, respectable newspapers foresaw the end of the pandemic.
The Pfizer vaccine needs to be stored at -80 C (-112 F) all the time. The ultracold logistics rule out most of Asia and Africa. In the best case, it is accessible to 2.5 billion people in 25 countries, mainly North America and Europe. Dr Fauci called the results extraordinary, at the same time admitting he hadn’t seen the data yet. May the vaccine truly have extraordinary success, and spell the end of the pandemic. * When such joyous news is announced, it is in bad taste to criticize or express concerns. The critic will be termed a spoilsport, a pessimist, a conspiracy theorist, or antivaxx activist. I am none of these. I am, however, puzzled by the way Pfizer has gone about the process. I would like to voice these concerns so as to tone down the hype, if it is hype. As I wrote earlier, in the trials, the company must reach pre-agreed numbers of Covid-19 cases, in the vaccine and the placebo groups. Since the beginning, Pfizer has been aggressively demanding more interim points, and fewer cases. Their minimum point for seeking authorization was 32. (32 patients among 30000 participants). Anybody who has studied statistics would know the number doesn’t look significant. In fact, scientists not working for Pfizer raised this concern. This was summer time, and the curve was going down. The Pfizer scientists were worried about the time it may take to reach a higher figure. But they amended protocol to look at the data at 62 cases. Not only the numbers, Pfizer’s plan allowed the mildest cases to be counted. Most other trials including Johnson & Johnson and Oxford, even the Chinese vaccine trial currently, were paused because of adverse events. This is when a participant develops a condition that may have been caused by the vaccine. The trial remains paused until the condition is investigated. Pfizer enlarged its sample size to 44,000 but didn’t face a single adverse event, which must be attributed to its luck. On 26 October, Albert Bourla, Pfizer’s CEO said they didn’t have 32 covid cases yet. The interim data, when available, is reviewed by an independent board. Pfizer was once again lucky, the cases surged dramatically. On Sunday, 8 November, the independent board came, reviewed the data of 94 cases, and let the company management know the conclusion without sharing data. * The trial is not over. It will be over once Pfizer reaches 164 cases. The right thing was to wait till the end of the trials, and then publish the data in a medical journal for peers to review. Once it is peer-reviewed, the results can be published worldwide. Instead of that, Pfizer opted to release unpublished, unreviewed half-baked data as news. Not only that, the news was released consciously early on Monday morning before the US stock markets open. Stock markets are like dogs who will drool and jump at the sight of a dummy bone. When the markets opened, Pfizer shares leaped by 15%, its partner BioNTech’s by 24%, and the major indexes reached new records. Such outright corruption was glossed over in the euphoria of the 90% effective vaccine. FDA now has stricter standards after botching hydroxychloroquine and plasma episodes. Scott Gottlieb, the previous FDA commissioner, is now on Pfizer’s board. That may help in the approval process. * Though times are exceptional, and any vaccine may be better than no vaccine, knowledge of Pfizer’s maneuvers dilutes the joy of their 90% effective news. Ravi
"Up to 2.5 billion people will not have to compete with those who actually depend on a vaccine that can be easily transported because the infrastructure in North America and Europe allows a continuous ultracold chain as it is required by the Pfizer vaccine."
Suddenly, this sounds good, doesn't it?
I wonder if anyone will even notice though as it would require putting energy into criticizing anything other than the election
Not really; they seem to have gone out of their way to be election-relevant:
> The first analysis was to occur after 32 volunteers — both those who received the vaccine and those on placebo — had contracted Covid-19. If fewer than six volunteers in the group who received the vaccine had developed Covid-19, the companies would make an announcement that the vaccine appeared to be effective. The study would continue until at least 164 cases of Covid-19 — individuals with at least one symptom and a positive test result — had been reported.
> In their announcement of the results, Pfizer and BioNTech revealed a surprise. The companies said they had decided not to conduct the 32-case analysis “after a discussion with the FDA.” Instead, they planned to conduct the analysis after 62 cases. But by the time the plan had been formalized, there had been 94 cases of Covid-19 in the study.
> Gruber said that Pfizer and BioNTech had decided in late October that they wanted to drop the 32-case interim analysis. At that time, the companies decided to stop having their lab confirm cases of Covid-19 in the study, instead leaving samples in storage. The FDA was aware of this decision. Discussions between the agency and the companies concluded, and testing began this past Wednesday.
https://www.statnews.com/2020/11/09/covid-19-vaccine-from-pf...
So they had a plan in place to release interim results as soon as 32 cases were detected, but then in late October they decided they wanted to alter the plan. And just to make sure the original plan couldn't happen no matter what, they also stopped their ongoing testing, choosing to resume it on November 4th, when they learned they had dramatically exceeded their revised goals.
Pfizer expects the vaccine to be good for up to one week at -8°C to +2°C, so the difference in stability or storage life at -70°C or -80°C might be a small issue compared to what difference it makes on the requirements on the continuous cold chain. It sounds like using dry ice might be a 90/10 solution, as Michael Seibel would call it: get 90% of the result with 10% of the effort.
My understanding of the "wrongness" of insider trading is using privileged information to make profit and thus "stealing" from other investors - at least that's what I've picked up from Matt Levine.
In this case he's trading on very public information. Anyone who has held Pfizer stock for a while must have at least considered if this news was the moment to cash some of it in.
When he made the decision to sell he'd have known the trial results would have been coming in, but couldn't have known what they'd be. If they'd just come back with a "no go" the stock would have tanked. If anything it seems like an unfair disadvantage, every other long term investor in Pfizer can decide on the day of the announcement what to do, the CEO has to bet months in advance.
The question here is: is "Let's make the announcement on Wednesday. Wait, I have a trade scheduled on Tuesday, so let's move it to Tuesday because I expect an overreaction from the market." illegal or unethical? Or maybe he had no influence on the date and got lucky.