INDCJournal: Is Sumner Redstone <i><b>Really</b></i> Dumping Stock?

« Oh, That Picture ... | Main | Justice? »

September 19, 2004

Is Sumner Redstone Really Dumping Stock?

Posted by Bill

Over at the American Thinker we read this:

Unless someone has hacked the Security and Exchange Commission�s website, it would appear that Viacom�s Chairman and CEO Sumner Redstone chose to sell almost $12 million worth of stock in the midst of the Rathergate scandal roiling its wholly-owned subsidiary, CBS. A copy of the SEC�s Form 4 �Statement of Changes in Beneficial Ownership� posted on their website indicates that the billionaire exercised 341,500 options, and sold the stock on the same day, September 14, 2004.

But an INDC reader tells me:

What they are seeing is a paper transaction of a stock option being
exercised, which is the paper sale of some shares at $35
to cover the lower cost ($15) of the option shares. There was no actual
sale of shares, no cash gain, and Redstone will not have to pay taxes as
a result of exercising his stock option, which is a common practice in
corporate America. The reason for the SEC filing is that he is on the
Board of Directors of Viacom.

To be honest, I received the lowest grade of my college career in Finance, and the subject matter tends to make me scratch my head, twitch and shift uncomfortably in my seat. Is my reader right? Is this a blogospheric rumor run amok?

UPDATE: Seems like everyone else performed poorly in Intro to Finance as well ... "Bueller? Bueller?"

UPDATE: Reader Mark Wilson comments:

Your reader is wrong. The options were exercised and the stock received upon exercise was sold. However, it is not surprising for a major shareholder to periodically sell shares for a variety of reasons. Sumner Redstone sold less than 1/2 of 1 percent of the shares of Viacom he directly or indirectly controls.

Posted by Bill at September 19, 2004 11:30 PM | TrackBack (21)

Comments

Posted by: Mark Wilson at September 20, 2004 12:04 AM

I don't think it takes insider info to realize that the news product may lose value.

Posted by: Joe R. the Unabrewer at September 20, 2004 12:08 AM

He exercised 341,500 options, and sold 341,500 shares. So, yes, he did make some money.

However, there are all sorts of benign reasons for this. He may have a disproportionate amount of his net worth in Viacom, and this is a natural part of diversifying his portfolio.

Posted by: fonter at September 20, 2004 12:11 AM

Mark Wilson is correct. It is in essence a sale of stock, but not a very significant one.

Posted by: TallDave at September 20, 2004 12:41 AM

As fonter said, it's very common for CEOs, company presidents, etc. to regularly sell stock to diversify their portfolio. They often do it on a schedule so that no one can accuse them of insider trading. I see a news story every time Bill Gates sells some Microsoft shares, and his spokesperson always says that it is part of his regular sale to diversify his portfolio.

Posted by: Raistlan at September 20, 2004 01:40 AM