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Scott Forstall and Mickey Drexler Net Millions in Apple Stock Sales

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Apr 12, 2001
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A pair of filings with the U.S. Securities and Exchange Commission reveal that Apple executive Scott Fortsall and board member Mickey Drexler each sold off tens of thousands of shares of Apple stock on Friday, netting millions of dollars each.

forstall-150x171.jpg
Forstall, who serves as senior vice president of iOS Software and has been a fixture in Apple's keynote presentations and media events, sold off 64,151 shares of Apple stock on Friday, netting roughly $38.7 million. Forstall gained 120,000 shares of Apple stock last month as a 2008 retention bonus of restricted stock units converted to actual stock. 55,849 shares were immediately sold off at that time to account for the taxes due on the conversion, and Forstall held on to the remaining shares until last Friday.

Following Friday's transaction, Forstall holds 2,988 shares of Apple stock, worth roughly $1.75 million at today's share price and the same number of shares he held prior to last month's vesting of his 2008 retention bonus. Forstall is also in line to receive a number of other stock grants should he remain with the company over the next several years, including a 150,000-unit grant that will vest in equal portions next year and in 2016. A separate grant of 100,000 units will vest in 2014.

Meanwhile, longtime Apple board member Mickey Drexler, who serves as Chairman and CEO of J. Crew and was previously President and CEO of The Gap, has cashed in on stock options dating back nearly a decade in order to reap a substantial windfall.

Drexler exercised a set of 20,000 options from 2003 priced at $9.16 each and a second set of 20,000 options from 2004 priced at $14.205 each, selling off all 40,000 shares on Friday for $24.1 million. After accounting for the exercise prices on the options, Drexler netted close to $23.7 million. Drexler continues to hold 584 shares of Apple stock worth roughly $384,000 at today's share price.

Article Link: Scott Forstall and Mickey Drexler Net Millions in Apple Stock Sales
 
Article Link
https://www.macrumors.com/2012/05/01/scott-forstall-and-mickey-drexler-net-millions-in-apple-stock-sales/
Interesting they both sold off almost their entire current holdings at the same time. I wonder what need they had for the money, or what investment vehicle they think will be better than tens of thousands of Apple shares?

Side question: When this many shares are sold, is this when Apple use some of its cash to buy back shares in order to keep the price from dropping? So Apple coordinates with the employee to prevent the price from dipping?
 
They are required to date transactions months in advance or longer, so they cannot be accused of insider trading or dumping the stock before bad news. This is common practice.
 
reltm said:
Side question: When this many shares are sold, is this when Apple use some of its cash to buy back shares in order to keep the price from dropping? So Apple coordinates with the employee to prevent the price from dipping?
Click to expand...

Apple (NASDAQ: AAPL) has an average daily volume of more than 24 million shares traded. Drexler and Forstall together sold about 100,000 shares, or less than half a percent of the average daily "float." Its possible - but unlikely - that this many shares might exert some downward market pressure.

For obvious reasons, executives exercising options use some discretion in timing their transactions. They want to get the best price possible (consistent with their obligations under Securities law) so they typically schedule their options exercises so as not to coincide with significant company announcements.

Final note: Board Member Mickey Drexler exercised options issued in 2003 and 2004, with prices of $9.16 and $14 per share. Apple will be able to deduct from its US corporate taxes the difference between the option price and the sales price. Obviously an additional 40,000 shares publicly traded will have a certain dilution effect, but one certainly wonders if this is a great as the benefit the company will reap from a $23 million non-cash tax deduction. On the other hand, the US Treasury will benefit from the personal income taxes Forstall and Drexler will pay on their sale, which will likely be at the long-term capital gains rate of 15% - or considerably less than a Taco Bell manager would pay on a $5,000 bonus on top of his $55,000 annual salary. Something ain't right with the US tax code.
 
I'm planning on buying...this isn't like some Enron crap when all those big wigs started selling their shares because they knew it was going to drop. Right?
 
@vrDrew - would you have a problem with somebody paying only $750 in taxes on a $5000 gain for shares sold that were held for over a year?? (the "taco bell bonus")
 
The reason for selling, and for selling all of what just vested, is because they need to diversify. All their net worth (and their employer) is Apple.

If you have 400,000 shares still vesting, no reason not to sell the 100,000 that just vested-- you still have 400,000.

As for what apple's going to do-- I expect it will go down. It might visit $550, or $500, or maybe $450. But that's the short term.

If you're an investor, you should be more concerned about what apple will be like in a year or three.... and in three years I expect Apple will be over $2,200 a share.

No Joke.
 
econgeek said:
The reason for selling, and for selling all of what just vested, is because they need to diversify. All their net worth (and their employer) is Apple.

If you have 400,000 shares still vesting, no reason not to sell the 100,000 that just vested-- you still have 400,000.

As for what apple's going to do-- I expect it will go down. It might visit $550, or $500, or maybe $450. But that's the short term.

If you're an investor, you should be more concerned about what apple will be like in a year or three.... and in three years I expect Apple will be over $2,200 a share.

No Joke.
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If Apple becomes part of the Dow Jones industrial like rumored the stock will split long before getting anywhere close to $1200.

As for Forstalls move. He needs to sell.
 
55,849 / 120,000 = 46.5% paid in taxes.

"Restricted stock and RSUs are taxed differently than other kinds of stock options, such as statutory or nonstatutory employee stock purchase plans (ESPPs). Those plans generally have tax consequences at the date of exercise or sale, whereas restricted stock usually becomes taxable upon the completion of the vesting schedule. Restricted stock plans are not eligible for capital gains treatment, and the entire amount of the vested stock must be counted as ordinary income in the year of vesting."

Do your homework before you claim "greed", and how his "effective tax rate is so low".

Even if it *had* only been 15% he would have paid more in taxes *in one year* than you will probably make in your lifetime.
 
Why is this any of your damn business!
People sell stock all the time. Buuuuuuuuut because it's Apple some of you think there's an effing conspiracy. Get a life.
 
Yes, but these are officers of the company. Insider trading is strictly regulated by the SEC.

Even though the percentage of the float transacted by Forstall and Drexler was minimal, it is newsworthy because Forstall is a member of the senior management team and Drexler sits on the board.

Apple is required by law to disclose these transactions. It's important for current shareholders and potential investors to know of such activity.

Telling people to "get a life" is not relevant for this discussion. It is very much the "damn business" of the investor community.
 
vrDrew said:
Final note: Board Member Mickey Drexler exercised options issued in 2003 and 2004, with prices of $9.16 and $14 per share. Apple will be able to deduct from its US corporate taxes the difference between the option price and the sales price. Obviously an additional 40,000 shares publicly traded will have a certain dilution effect, but one certainly wonders if this is a great as the benefit the company will reap from a $23 million non-cash tax deduction. On the other hand, the US Treasury will benefit from the personal income taxes Forstall and Drexler will pay on their sale, which will likely be at the long-term capital gains rate of 15% - or considerably less than a Taco Bell manager would pay on a $5,000 bonus on top of his $55,000 annual salary. Something ain't right with the US tax code.
Click to expand...

How is $3,450,000 (15% of $23M, which is not an ) "considerably less" than $60,000? If you mean that the $60,000 will be taxed at 25% then say the numbers. Also the $5000 bonus is income not capital gains so it is taxed on a different scale. If it was capitol gains it would be at 5% for the Taco Bell manager not the 15% Apple is paying, because of the amount.
 
BoulderAdonis said:
55,849 / 120,000 = 46.5% paid in taxes.

"Restricted stock and RSUs are taxed differently than other kinds of stock options, such as statutory or nonstatutory employee stock purchase plans (ESPPs). Those plans generally have tax consequences at the date of exercise or sale, whereas restricted stock usually becomes taxable upon the completion of the vesting schedule. Restricted stock plans are not eligible for capital gains treatment, and the entire amount of the vested stock must be counted as ordinary income in the year of vesting."

Do your homework before you claim "greed", and how his "effective tax rate is so low".

Even if it *had* only been 15% he would have paid more in taxes *in one year* than you will probably make in your lifetime.
Click to expand...
I was going to post about that too. It looks like it is taxed as ordinary income, not long term capital gains. That's some bad tax planning. He probably should have put it in his IRA/WBP over the years to at least defer the taxes.

So Apple was taxed on it, gave it to Scott, then he was taxed on it again. When the government gets 25/42 that means the owners only get .75x.68 or 51% . It is bad social policy to give the government 50% of the fruits of people's labor. It destroys capital that would otherwise go into expanding jobs either with direct investment or through savings which banks leverage into business loans and mortgage loans of benefit to real people in their real lives.

Rocketman
 
re original article

ah...more aapl lottery winners

buy yourselves a new porsche 911

send another one to me
 
Rocketman said:
I was going to post about that too. It looks like it is taxed as ordinary income, not long term capital gains. That's some bad tax planning. He probably should have put it in his IRA/WBP over the years to at least defer the taxes.
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Nah, withdrawals from a Traditional IRA are taxed as income at the tax rate of the person at the time of the withdrawal.

Besides, I don't think you can transfer equities into a Traditional IRA or Roth IRA.

The acquisition date is based on the date when the shares were issued, so they wouldn't fall under long-term capital gains anyhow. The short-term capital rate is the same as the income tax rate.

What's laughable is the number of people who think that Forstall and Drexler are in the 15% federal income tax bracket. No freakin' way. Those guys are in the 28% or 35% bracket. This is why Forstall needed to dump almost half of his issued shares immediately to cover federal and California state income taxes.

If they hold onto their remaining shares for over a year, the gain in value would be taxed at long-term capital gains rates just like if anyone here bought Apple yesterday and sold on May 1, 2013.

Anyhow, portfolio diversification is a must.
 
cvaldes said:
What's laughable is the number of people who think that Forstall and Drexler are in the 15% federal income tax bracket. No freakin' way.
Click to expand...

Drexler will almost certainly pay the 15% long-term capital gains rate on his options exercise. (Forstall's RSU sale will be taxed as ordinary income, apologies for inadvertently implying HIS sale would be subject to LTCG rates.)

I don't have anything against Mickey Drexler, but at some level I think we DO need to question the fundamental fairness of our existing tax code. Its not as if his gain came about as a result of selling a long-time Drexler family homestead, or from the sale of a successful investment made years ago from his personal savings - two cases one could argue as deserving of preferential tax treatment.
 
entatlrg said:
Maybe they know something we don't know and fear the stock price is going to go down?
Click to expand...

I guess it's no fun being a millionaire on paper only... (I wouldn't know).

Yeah, I know poor things...

And even, if the stock soars even higher... it's 38 millions right now (minus any taxes). I think they're set for life...

To those who say this is greed, that would be to always wait of it to go even higher and not be happy with the current price.
 
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