Golden Stock Parachutes: Execs Cashing Out

By Reyna Gobel | May 26, 2009 AAA
Golden Stock Parachutes: Execs Cashing Out

You're riding out the storm on a stock that is now barely worth a buck because you have faith in the company in which your money is invested. However, someone else doesn't: the executives in charge. They're selling their stock while they can still earn that buck.
GM is a prime example, as several executives rushed to sell their stock while the company still "considers" bankruptcy. But they're not the only ones to pull off personal stock sales when a company's in trouble.

According to the LA Times, Angelo Mozilo, the former Countrywide CEO, sold over $140 million in company stock in the last couple of years before Countrywide Financial Corp. was bought by Bank of America. (For further reading, check out Uncovering Insider Trading and Insider Selling Isn't Always A Bad Sign.)


These speedy stock sales make you wonder if these execs alternate throughout the day between job interviews for their next employer, verifying their "exit" packages and calling their stock broker to make sure they don't have any stake left in the company in which your dollars are still invested.

But for us consumers and investors, are these stock sales a sign that the companies we are invested in are going into a bottomless pit of bankruptcy, and should you sell your stock while it's still worth a dollar? It depends on your investing attitude because it's a risky move to keep the stock.

If your stock is worth next to nothing, you can ride out the storm and see what happens. Just make sure you can afford the loss if the stock is diluted even further. Depending on the company and the situation, you could be rewarded by a stock increase after the company is bought by a more stable company or the company could make a miraculous recovery.

You may end up being smarter than the executives in charge. (To find out more, read When Fear And Greed Take Over and Patience Is A Virtue.)

comments powered by Disqus
Related Articles
  1. How Mergers and Acquisitions Can Affect ...
    Investing Basics

    How Mergers and Acquisitions Can Affect ...

  2. Are You An Investor Or Trader?
    Investing Basics

    Are You An Investor Or Trader?

  3. The Biggest Mergers & Acquisitions In ...
    Investing Basics

    The Biggest Mergers & Acquisitions In ...

  4. Building A Fortune: Jerry Jones And ...
    Entrepreneurship

    Building A Fortune: Jerry Jones And ...

  5. How To Profit From Mergers And Acquisitions ...
    Investing Basics

    How To Profit From Mergers And Acquisitions ...

Trading Center