Apple exec Scott Forstall sells 95% of company shares worth $38.7M - Page 2

Quote:

Originally Posted by paxman 

I can't imagine why any Apple - or any other top level exec from any big corp would let money be a factor in where they go and what they do. Its silly money and the one thing it affords you is the option to make career or life choices without having to give a crap about the financial aspects. With 35 million dollar (less taxes) in the bank he can open up a bar and spend his day handing out free drinks if he so pleases. Is money a motivating factor for these guys?

It certainly wasn't for Steve Jobs. He was raking in close to $40 million a year in Disney dividends. He could have just sat on the beach and read books.

Heck, Forstall could quit tomorrow, invest the $17 million remaining after taxes and live on the interest. He would still be raking in twice as much at 8% interest versus his current salary of $700K.

Quote:

Originally Posted by cvaldes1831 

Quote:

Originally Posted by paxman 

I can't imagine why any Apple - or any other top level exec from any big corp would let money be a factor in where they go and what they do. Its silly money and the one thing it affords you is the option to make career or life choices without having to give a crap about the financial aspects. With 35 million dollar (less taxes) in the bank he can open up a bar and spend his day handing out free drinks if he so pleases. Is money a motivating factor for these guys?

 

It certainly wasn't for Steve Jobs. He was raking in close to $40 million a year in Disney dividends. He could have just sat on the beach and read books.

 

Heck, Forstall could quit tomorrow, invest the $17 million remaining after taxes and live on the interest. He would still be raking in twice as much at 8% interest versus his current salary of $700K.

The salary likely just covers his nut.  Mortgage payments, boat payments, vacations, diamond necklaces for his teenage girls maybe.

The real money is in the stock.

Quote:

Originally Posted by cvaldes1831 

You are misinformed.

 

There are two capital gains tax rates: short-term (for investments held under a year) and long-term (over one year).

 

The short-term capital gains tax rates always match the tax rate for income in the same tax bracket. Thus, if you are in the 28% tax bracket for income, you will be paying 28% short-term capital gains taxes.

 

The current tax laws project an increase in the long-term capital gains tax rate from 15% to 20% (not 35+% as erroneously claimed above) for anyone above the 15% income tax bracket. 

 

Be realistic: long-term capital gains tax rates will never exceed the income tax rate at that bracket. Otherwise, no one would want to invest for the long-term. The lack of long-term investment would likely destroy the world economy.

 

Moreover, the tax brackets themselves will change a bit:

 

http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States

 

Forstall is probably in the 35% marginal tax bracket. Which makes sense why he had to sell off almost half of the RSUs when they were issued in March. He owned 35% income tax to the IRS plus another 9-10% to California's Franchise Tax Board.

http://money.cnn.com/magazines/moneymag/money101/lesson10/index.htm

See #5

Quote:

Originally Posted by I am a Zither Zather Zuzz 

 

 

I find it extraordinary that he is selling 95%.  How common is that?  Does a comany's stock generally go up when an officer sells 95%

You don't know much about insider trading. People do this all the time.

Forstall's sale was barely a blimp on the radar concerning the outstanding float. Again, he was obligated to sell a large amount in March just to cover taxes. These weren't stock options, they were RSUs. The tax liability is due when the shares were issued shortly after the vesting date.

It must be reiterated that having all your portfolio in one equity issue is dangerous. There are thousands of former Enron employees who will tell you that. Smart investors (which don't seem to include you) diversify.

He still has $1.8M in AAPL shares but a cautious investor probably won't keep more than 10% of his/her portfolio in any single company.

Quote:

Originally Posted by bobinmurphy 

 

http://money.cnn.com/magazines/moneymag/money101/lesson10/index.htm

 

See #5

See #3

Quote:

Originally Posted by bobinmurphy 

 

http://money.cnn.com/magazines/moneymag/money101/lesson10/index.htm

 

See #5

Forstall's holdings weren't stock options. They were RSUs. There was no exercise date.

RSUs have a vesting date and typically other conditions. When those other conditions (typically performance related), the shares are issued. The recipient does not have the choice to defer the issue date.

http://www.investopedia.com/articles/tax/09/restricted-stock-tax.asp#axzz1tjJ7FdKp

http://www.quora.com/What-is-the-difference-between-stock-options-and-RSU

For those who never granted shares in a company either ISO or RCU, there are various terms some times tied to having these grants some are they must he fully exercised with in a period of time usually 4 yrs, meaning they have to be sold off once they are vested and 4 yrs have past. Some times companies put in place what is called an evergreen programs, when share vest and are sold the company will issue you new shares to match what you just sold, it is way retain people. In this case he may have been required to sell off shares or by doing so he will get more shares in the future. Part of the reason companies put these kinds of things in place is to make sure no one person in the company can have a controlling interest in the company.

Anyway there are lots of reason he is selling and most may have nothing to do about leaving the company.

Quote:

Originally Posted by Chris_CA 

Selling stock is no big deal. Happens all the time.
Clck on Insider Transactions on the left side
http://finance.yahoo.com/q/it?s=AAPL

Sure, but 95%? When the hell do upper executives get rid of essentially all their stock in their company? That's a pretty damn big deal, especially when some are predicting 1K/share within the next year. 

I honestly think Forstall is the most important person at Apple right now. Would be a massive, massive blow if he leaves and something that would depress me greatly. 

Nobody keeps that much cash in their house or bank vault. It needs to be put somewhere. Apple is a super company that has been setting records often in the last couple of years. What makes Scott Forstall think those shares will be worth less in the future? Why wouldn't he keep ownership of those share unless he believes that the value will drop? See? He does have a clue about the future of the company. Otherwise he would hold on to those shares and watch them grow. Now you can bet he will be putting that money somewhere else that he believes will be a better investment.

Quote:

Originally Posted by jragosta 

 

 

 

It's not that simple - there's more involved than capital gains.

The stock was a grant in 2008. At that time, the total value of the shares would have been counted as income - not capital gains. Capital gains would only  be the increase in value since 2008. 

There's more to the story one way or the other. Given that the grant was in 2008 and that he sold ALL of the shares to pay taxes, something else has happened to increase his tax liability. Either that or he previously sold half of the stock without paying the taxes.

Either way, it's really not important as far as Apple is concerned. He has plenty of incentive to stay regardless of whether he held this batch of stock or sold it.

Yes, it's possible assuming Forstall had the cash in 2008 to pay the tax for Section 83(b) treatment. Let's say his 120,000 RSUs were worth $150 in 2008. He would of had to declare $18M as ordinary income that year. At a marginal federal tax rate of 35% plus another 10% for California he would have owed about $8.1M in taxes out of pocket.

The risk in taking the Section 83(b) path is if he was fired or if the company failed. Either way, there would be no way for him to recover the $8.1M in tax paid. The upside is that he would have paid the long-term capital gains rate on the increase in value between 2008 and 2012. Let's say the stock when from $150 to $550 during that time: the increase in value would be $48M. Long-term CGT would be $7.2M at the 15% LT CGT rate for 35% income tax bracket people. Thus his total taxes paid would be $15.3M if he went the Section 83(b) path ($8.1M income in 2008 + $7.2M CGT in 2012).

If he did not go Section 83(b), at the time of the issue (March 2012), he would have been on the hook for the entire amount (let's say $66M) as income, about $30M. But he wouldn't have to cough up any cash to cover his tax liability.

Based on the fact that he sold nearly 45% of his RSUs in March, it seems likely that he used them to pay the 35% Federal income tax, 10% California income tax and did not elect to take the Section 83(b) path in 2008. I don't think he had $8.1M in cash back then.

Quote:

Originally Posted by Smallwheels 

Nobody keeps that much cash in their house or bank vault. It needs to be put somewhere. Apple is a super company that has been setting records often in the last couple of years. What makes Scott Forstall think those shares will be worth less in the future? Why wouldn't he keep ownership of those share unless he believes that the value will drop? See? He does have a clue about the future of the company. Otherwise he would hold on to those shares and watch them grow. Now you can bet he will be putting that money somewhere else that he believes will be a better investment.

Yes, Forstall's probably shorting RIMM and NOK right now.

Quote:

Originally Posted by cvaldes1831 

Quote:

Originally Posted by I am a Zither Zather Zuzz 

 

 

I find it extraordinary that he is selling 95%.  How common is that?  Does a comany's stock generally go up when an officer sells 95%

 

You don't know much about insider trading. People do this all the time.

 

Forstall's sale was barely a blimp on the radar concerning the outstanding float. Again, he was obligated to sell a large amount in March just to cover taxes. These weren't stock options, they were RSUs. The tax liability is due when the shares were issued shortly after the vesting date.

 

It must be reiterated that having all your portfolio in one equity issue is dangerous. There are thousands of former Enron employees who will tell you that. Smart investors (which don't seem to include you) diversify.

 

He still has $1.8M in AAPL shares but a cautious investor probably won't keep more than 10% of his/her portfolio in any single company.

That makes a lot of sense.

Quote:

Originally Posted by digitalclips 

I hope he isn't leaving ...  That next 100,000 should be worth waiting for Scott!

Scott is in for the long haul. Knowing him like I do and having worked around him he's in it for the long haul.

Maybe because most of what you hear is bullsh-t driven by a political party that tells nothing but lies about the people who actually make money in the real world.

Quote:

Originally Posted by mdriftmeyer 

 

Scott is in for the long haul. Knowing him like I do and having worked around him he's in it for the long haul.

Yes....?  Go on....

A.) What does he know that we don't know?

B.) When did he learn of it?

Quote:

Originally Posted by mausz 

 

40mln+ (only in bonusses) isn't enough ?

You can never have to many spare $s ;)

Quote:

Originally Posted by mdriftmeyer 

 

Scott is in for the long haul. Knowing him like I do and having worked around him he's in it for the long haul.

That's great to hear, thanks for that. Say Hi to Scott for me ;)

Quote:

Originally Posted by iSheldon 

A.) What does he know that we don't know?

B.) When did he learn of it?

A.) Lots of things about Apple.

B.) During his entire tenure at Apple.

Quote:

Originally Posted by scotty321 

Stop being so dense, people. If Forstall sold that many shares, then he sees something at Apple that he doesn’t like. He’s had several months of working with Tim Cook, and he realizes that he’s no Steve Jobs. Not to mention the horrible recent hirings of execs from United Airlines, Yahoo, and Dixons… 3 of the worst companies on the planet. The ship is sinking, and Forstall is jumping off while he can. I wouldn’t be surprised if Forstall leaves Apple fairly soon after this stock sale.

Very funny, Scotty. Now, beam down my clothes.

Forstall is worth his weight in gold at Apple. 

I'm not going to predict his future moves, but Apple needs him. 

Quote:

Originally Posted by scotty321 

Stop being so dense, people. If Forstall sold that many shares, then he sees something at Apple that he doesn’t like. He’s had several months of working with Tim Cook, and he realizes that he’s no Steve Jobs. Not to mention the horrible recent hirings of execs from United Airlines, Yahoo, and Dixons… 3 of the worst companies on the planet. The ship is sinking, and Forstall is jumping off while he can. I wouldn’t be surprised if Forstall leaves Apple fairly soon after this stock sale.

Except that Tim Cook at the helm of Apple is nothing new. Cook knows how to run a company. He might not b a visionary, but dollars-to-donuts he's smart enough to hire and keep them.

You're assuming way, way too much here when there is absolutely no evidence supporting it. ALL INDICATIONS point to the next 5 years (at the very least) belonging to Apple. 

Quote:

Originally Posted by pembroke 

I always thought his presentations were sharp and lucid - better than SJ's in fact. Selling 95% sends out a non- confidence message alright. But who knows, perhaps he wants the funds to donate to charity, or to build some schools somewhere?

If Scott Forstall wanted to donate to charity, he wouldn't have sold the shares. When you donate fully appreciated securities to a charity here in the USA, you write off the fair market value of the stock but neither you nor the recipient needs to pay capital gains taxes on the difference between the fair market and acquisition prices.

Let's say you bought 100 shares of AAPL at $100 and donate them when they are worth $600. The charity gets $60,000 (which you would claim on your tax return) yet your out-of-pocket expenses were $10,000. Now if you sold those shares at $600, you'd have to pay capital gains taxes on the earnings ($50,000) before you could donate. Let's say you're in Forstall's tax bracket, 35%. The long-term capital gains tax rate is 15%, meaning you'd have to shell out $7,500 to the feds. Thus your out-of-pocket expenses are $17,500 and the charity gets $52,500.

Here's the Motley Fool's capsule summary on the topic:

http://www.fool.com/FoolCharityFund/Donating_Stock.htm

That's why major charities have forms for the transfer of securities. It's better for both parties.

Here's an example of the American Red Cross's instructions for donating stock and mutual funds:

http://www.redcross.org/portal/site/en/menuitem.d229a5f06620c6052b1ecfbf43181aa0/?vgnextoid=35db1b655eb3b110VgnVCM10000089f0870aRCRD

Most likely, Forstall's remaining $1.8M in AAPL holdings are earmarked for charity. He can give freely in the future (from April 2013) to offset his tax burden.

That's how smart Americans make major donations. Don't write a check, give property (vehicles, real estate, securities). Donating securities is the easiest as there is very little disagreement about the fair market value of the donation. Things like vehicles and real estate are far trickier.

Note that this is probably what Laurene Jobs does. The family's Disney holdings were transferred to a revocable living trust -- probably called the Steven P Jobs Trust -- at some point prior to his death. She was a former Merrill Lynch analyst, she would know this common tax strategy.

If you have plans to donate on a regular basis in the future, you should think about earmarking some your equities for charity. You could buy an ETF like SPY, QQQQ, IWM, or in a blue-chip stock like AAPL, GOOG, INTC, IBM, ORCL, DIS, T, whatever and hold onto it for at least a year.

Note that there's no minimum donation, and that you don't have to donate the entire lot. If you bought a hundred shares of ORCL in 2008 and wanted to donate 20 of them to the Red Cross tomorrow, that's fine.

At least, that's how it works in the USA. Does the UK have similar avenues for charitable contributions?

One word: Diversification.  He has a lot of AAPL coming, 60 million dollars more, and selling his current stocks allows him to be financially secure forever. 
 

Quote:

Originally Posted by Quadra 610 

 

Except that Tim Cook at the helm of Apple is nothing new. Cook knows how to run a company. He might not b a visionary, but dollars-to-donuts he's smart enough to hire and keep them.

 

You're assuming way, way too much here when there is absolutely no evidence supporting it. ALL INDICATIONS point to the next 5 years (at the very least) belonging to Apple. 

Being excellent at executing on things like contracts, supply chain, production ramp-ups, etc. (while a huge thing) isn't enough for 5 years. You have to have something compelling to sell, and so far we haven't seen where that vision is going to come from. I own stock and am VERY interested to see who is stepping into the shoes of visionary and defining the direction for the products. There are damned few places that have that type of person.

As for the stock sale, I don't really read anything major into it - the stock is at a high, it's a good time to take some profits if you have similar numbers of shares coming again in the next years.

Quote:

Originally Posted by Commodification 


Too much financial security = the death of creativity and drive for most people.

Clearly, the Apple board of directors do not think of Scott Forstall as an average guy. If they did, Forstall wouldn't be working in the capacity that he is now, nor would he have been offered several piles of RSUs. And remember, Forstall is raking in $700K in salary.

Note that Steve Jobs had all the financial security that he needed. He was raking in around $30-40 million a year in Disney dividends before he died. He could of just read books on the beach.

Heck, Larry Ellison doesn't need to work, neither does Warren Buffett. Bill Gates's best work has come after he left Microsoft.

Hell, Bill Gates never needed to work in his life; he was a trust fund baby from one of Seattle's oldest banking families. He could have just played poker with his prep school buddies all day.

Just going through all the possibilities here.   Maybe he is smart enough to know the reaction an exec selling 95% of his shares would get and wants to drive the price of APPL down.  For what reason?  Someone smarter than me can figure that one out.

The primary duty of a publicly traded company is to increase shareholder value.

I'm pretty sure that Apple's board of directors and senior management team understands that elementary concept.

Quote:

Originally Posted by zklausz 

Just going through all the possibilities here.   Maybe he is smart enough to know the reaction an exec selling 95% of his shares would get and wants to drive the price of APPL down.  For what reason?  Someone smarter than me can figure that one out.

I really doubt that his plan involves spending a few years in jail for stock manipulation.

Er, Apple's stock was up today.  If there was something odd or alarming about this wouldn't their stock have dropped and wouldn't this be bigger news.  I haven't really seen it reported outside of Apple fan sites.
 

Quote:

Originally Posted by Rogifan 

Er, Apple's stock was up today.  If there was something odd or alarming about this wouldn't their stock have dropped and wouldn't this be bigger news.  I haven't really seen it reported outside of Apple fan sites.
 

You must not have seen the breaking news...

Apple just declared a huge accounting error and has subsequently been driven into bankruptcy.