Originally Posted by dwilly
Wrong! If you ever owned stock options this is a common exercise
Actually, it's not.
Selling shares to pay taxes on options is common. But most of the recent examples of Apple execs selling shares involved selling essentially ALL of their shares. You don't need to do that to pay taxes - you only need to sell a portion.
Even the capital gains tax issue appears to be a red herring. Most proposals say that capital gains taxes will increase from 15% to either 20 or 22%. So you risk paying 7% more next year. Now, what are you going to do with all the extra cash?
If you plan to invest in other stocks, then the capital gains increase is a non-issue since you'll have to pay tax on the capital gains of the new stocks, anyway. So even if the new stock goes up as much as Apple does, it's a wash. Over the past decade, though, there have been few investments as good as AAPL, so you risk losing out if you put money in something else.
If you put the money in a safe, non-equity investment, the return will almost certainly be lower, so the lower investment returns would probably more than make up for the 5-7% increase in capital gains. Plus, many safe investments pay dividends that are taxed at income rates (up to 35% plus state taxes).
Diversification would be a reasonable argument if they were keeping some of the AAPL, but they're not.
Financially, it just doesn't make sense unless you think the stock has plateaued - which, again, doesn't seem likely. But once you've eliminated all the likely reasons, an unlikely one may be true.
Finally, of course, from a corporate governance perspective, you want key executives to have a significant amount of their money tied up in the company's stock - which is one of the arguments for giving the stock options and grants in the first place.
I don't like it. One or two execs selling shares doesn't mean much, but when several do so at roughly the same time, it's not a good sign.