I received an alert tonight from Infinera’s investor relations on some SEC filings posted today.
As per usual, key officers of the company are awarded stock-based compensation throughout the year which vests at certain times in the future. Today, these officers took action on their restricted stock units (RSNs)
The four SEC filings listed today show each owner acquiring a certain number of shares (signified with an “A”) and disposing of a certain number of shares (signified with a “D”).
The acquiring shares are the ones that were executed - meaning they took possession of those shares on the day of the transaction (in other words, they executed their option to buy).
When you execute, you have to pay taxes on the difference between the option strike price granted (this would be the amount personally ponied up to buy at the strike) and the end of day stock price (the amount those shares were actually worth on the date of execution). The difference between those amounts is essentially treated as income.
It then makes sense at this point to dispose of said shares just acquired to 1) actually pay for them at the strike price awarded, 2) pay taxes on the difference and 3) live the good life. The stock is, after all, part of their compensation model. Well, they didn’t exactly do just that this time.
What happened here if you take a look at each detail line - after acquiring (or exercising the option on) the stock, they turned around and disposed of just enough shares to pay for taxes - and kept the lion share of the rest.
So, these gentlemen effectively kept shares for themselves, using dollars that were effectively part of their compensation model to defer “living the good life” just a wee bit further down the road.
After this transaction -
Brad Feller, CFO, increased his personal stake from 31,313 shares to 60,617 shares.
Robert Jandro, Senior VP of sales, increased his personal stake from 36,499 shares to 49,210 shares.
Tom Fallon, CEO, increased his personal stake from 769,456 shares to 888,815 shares.
David Welch, President, increased his personal stake from 273,709 shares to 325,428 shares. David also has 1,029,875 shares held in various trusts that he manages.
Insider selling is a common activity performed by many executives for many different reasons and those reasons are usually orthogonal to where they think the stock is actually heading. Many times the reasons are due to 1) 2) and 3) mentioned above. However, when a group of executives as a whole elect not to sell their shares I think the reason behind that is pretty clear.
Looking forward to the leg up.