Kirk Kerkorian's Tracinda Corp. disclosed it sold off 7.3 million shares in Ford Motor (F) and may sell the rest of its stake in the automaker. Originally valued at almost $1 billion, Kerkorian's stake has lost more than two-thirds of its value as Ford's stock price has plummeted. It closed Tuesday at 2.17 a share, down 7% for the day. Though the exact reasons for Kerkorian's sale aren't clear, he had borrowed $600 million to buy the Ford stake and recently needed to use casino holdings to back that debt.
KERKORIAN HAS PLENTY OF COMPANY
All in all, it's been a bad month for billionaires.
First Sumner Redstone, chairman of Viacom (VIAB) and CBS (CBS), sold $233 million in stock to help cover a loan. Then John Malone, chairman of Liberty Media (LCAPA), sold $49.5 million in stock to pay back a loan to Bank of America (BAC).
Chesapeake Energy (CHK) Chief Executive Aubrey McClendon may be the worst hit by this sort of stock squeeze. As Chesapeake's stock surged higher, the firm's enthusiastic founder borrowed to buy more and more shares. That worked until the middle of 2008: Since the beginning of July, Chesapeake shares have slid almost 65%. From Oct. 8-10, McClendon was forced to unload $569 million in his company's stock, or 94% of his stake in the firm, to cover those debts.
"The CEOs have been dreadfully surprised—just like the rest of the world," says Rawley Thomas of the Financial Management Association, an organization of financial professionals and academics.
SELLING DURING A FREE FALL
Indeed, several top corporate executives have dumped big portions of their company holdings, as identified by InsiderScore.com's Silverman, based on SEC filings that indicate these shares were sold to meet margin calls. Many of these sales occurred the week of Oct. 10, the worst week ever for the Dow Jones industrial average, which dropped 18.15%. Those include:
• Marvin Herb, a director at large bottling firm Coca-Cola Enterprises (CCE), who sold $17.7 million worth of shares Oct. 8-9.
• The co-founders of Boston Scientific (BSX), Peter Nicholas and John Abele, who sold off a combined $292 million in shares Oct. 8-17.
• Mark Grier, vice chairman of Prudential Financial (PRU), who sold off $1.75 million in shares on Oct. 10.
• Scholastic (SCHL) Chairman and CEO Richard Robinson, who sold shares valued at $3.1 million on Oct. 10.
• Tesoro (TSO) Chairman and Chief Executive Bruce Smith, who sold $2.2 million in shares on Oct. 10.
• Williams-Sonoma (WSM) Chairman and Chief Executive Howard Lester, who dropped $12.98 million in shares of his firm Oct. 13-14.
• XTO Energy (XTO) co-founder, Chairman and Chief Executive Bob Simpson, who sold off $101.3 million in his company's stock from Oct. 6-7.
SALES WERE ALMOST ALL INVOLUNTARY
When executives sell off such big stakes, they often try to reassure investors that they haven't lost faith in the company. On Oct. 16, after Micki Hidayatallah, chairman and chief executive of Allis-Chalmers Energy (ALY), had to sell off 400,000 shares to cover a margin loan, he issued a statement: "My sale of shares in no way reflects my views of Allis-Chalmers' current financial position or future performance." Allis-Chalmers shares had lost half of their value in a month, forcing his sale.
These sales were almost entirely involuntary, says Silverman, caused by the steep drop in stock prices over the past month
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