The curious case of a regional bank's insider stock sales
By Mark Hulbert
Is the stock market a level playing field for both corporate insiders and outsiders? Activity at
A number of insider stock-sales at
He is Nejat Seyhun, a finance professor at the University of Michigan, who recently helped launch a subscription website to assist investors in scrutinizing insider transaction data that are collected by the U.S. Securities and Exchange Commission.
Between March 2022 (after the merger was announced) until February of this year,
The largest single insider sale during this 12-month period was from Daryl Byrd, executive chairman of
Beth Ardoin, senior executive vice president and chief communications officer at
Seyhun says he finds this explanation questionable, "since having to exercise does not simultaneously create an obligation to sell shares." When asked about this, Ardoin said, "You are questioning actions taken last June , a time when TD publicly, clearly and consistently stated their confidence in their ability to complete the transaction" to acquire
Assuming the merger with TD Bank was still on track, Byrd could have received a higher price by waiting. In response to a question of whether the
In an interview, Seyhun emphasized that he is raising these questions because of the circumstantial evidence; he has no particular information that suggests that any of these trades were improper. He says that his focus on
Seyhun also says that he had no investment interest in
A fair question to ask is if any of the 1.1 million shares sold during this 12-month period were pre-planned, pursuant to a SEC rule known as 10b5-1. This rule enables insiders to sell a predetermined number of shares at predetermined intervals; insiders employ 10b5-1 plans in the hope that doing so will immunize them from regulatory scrutiny and the charge that their sales are motivated by inside information.
Though one of the insider sales during this period was a 10b5-1 sale, it raises questions. This was a sale by Bryan Jordan,
In an email, Ardoin said that Jordan set up his 10b5-1 plan in September 2022 as a "safety measure" in case the merger with TD Bank was delayed, since he owned a number of options that expired in March 2023, after which they would have been worthless.
Seyhun wonders why Jordan was worried that the merger may be delayed. "A potential delay exposes the shareholders to the risk that the stock price could drop substantially, as it also increases the likelihood of cancellation," Seyhun wrote in an email.
Most recently, a class-action lawsuit was filed alleging that various individuals involved with the proposed
Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at firstname.lastname@example.org
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