The skyrocketing stock prices of GameStop, BlackBerry and other companies are generating “YOLO” payments for some members of Reddit’s Wallstreetbets forum also deserve a windfall for business insiders.
As of January 1, executives at BlackBerry and GameStop have been selling stock, cashing in more than $ 22 million in total. Lately they’ve also gotten a big boost from the loose collective of amateur social media traders who have been relentlessly bidding on the companies’ stock and at least some of whom have stated their mission is to transfer profits from Wall Street to Main Street to lead. .
There is no allegation of improper insider trading in connection with any of the transactions. And multiple experts told CBS MoneyWatch that they see no evidence that any of the company’s insiders and executives who recently sold GameStop and BlackBerry stock did anything wrong.
Still, a person familiar with the stock sale told CBS MoneyWatch that GameStop has switched in recent days to restrict executives and insiders from selling additional stock.
Executives and insiders have left at the same time as Wallstreetbets participants are pushing their members to buy the stock. Robinhood, a popular trading app among Wallstreetbets investors, this week temporarily excluded traders of buying more shares of GameStop. The ban was partially canceled on Friday.
Executives tend to trade stocks through predetermined plans to avoid creating the appearance of insider trading, which is illegal. But notes on the transactions in recent filings that the executives have filed with the US Securities and Exchange Commission do not state that the recent stock sales at both BlackBerry and GameStop took place through these so-called 10b5-1 plans. That suggests that none of the transactions were planned in advance.
“Pay for happiness”
Perhaps more importantly, stock options and other stock grants are supposed to align executives with other investors – in short, corporate executives should be paid for their performance in building viable companies for the long term. But cashing in on what many see as reckless speculation driven by social media highlights problems with how senior executives are compensated, experts told CBS MoneyWatch.
“It’s a reward for happiness,” said Benjamin Golez, associate professor of finance at the Mendoza College of Business at the University of Notre Dame.
Three BlackBerry executives redeemed nearly $ 1.7 million worth of company stock last week. One of the executives, Steve Rai, BlackBerry’s Chief Financial Officer, has sold all of his shares in the company, although he has unexpired options that may turn into stocks in the future.
BlackBerry stock traded at around $ 5.50 before becoming the fodder of the conversation on Wallstreetbets’ bulletin board. At that price, the three executives’ shares would have been worth about $ 700,000. But Wallstreetbets’ subsequent frenzy added $ 1 million to the aggregate value of their shares.
The Wallstreetbets insurgents could cause an even bigger windfall for BlackBerry CEO John Chen. Under his compensation package for joining the software company in 2018, Chen could receive a one-time cash bonus of $ 90 million if BlackBerry’s stock trades above $ 30 for 10 days straight before the end of 2026.
On Wednesday, shares of BlackBerry, which lost more than $ 800 million in the last four reported quarters, got close to that magical number of $ 30, at $ 25, although they have since pulled back to about $ 14.
BlackBerry did not respond to a request for comment on the sale of executive stock. But a BlackBerry spokesperson told the Wall Street Journal that executives had sold their shares during a window that allowed transactions.
$ 20 million richer
The bank accounts of four executives of troubled retailer GameStop have also benefited from the Reddit raiders. GameStop has lost nearly $ 1.6 billion in the past three years. Sales are down 30% recently, and it is in the process of closing 1,000, or about 20%, of all of its stores. Still, the company’s stock is up from about $ 17 at the start of the year to $ 315 on Friday.
Since the beginning of the year, four members of GameStop’s board of directors have raised $ 20 million through the sale of company stock. One of the salespeople was Kurt Wolf, a money manager and former executive advisor who joined GameStop’s board last year. Hestia Capital, Wolf’s investment fund, sold more than two-thirds of its stake in GameStop in January, raising Wolf and his clients in just over $ 17 million.
GameStop did not return requests for comment on the sale of executive shares. Wolf declined to comment through a spokesperson. An filing with the SEC notes that Wolf sold to diversify his fund interests.
Thomas Gorman, a partner at law firm Dorsey & Whitney and a securities law expert who spent seven years with the Securities and Exchange Commission, said that if he advised the boards of companies whose shares have been sacrificed by Wallstreetbets traders, he would tell them to ask executives not to sell when the stock appears artificially elevated.
But Gorman also underlined that executives who do sell stock are not breaking any rules. Boards are unable to prevent executives from selling in a sudden run of inventory, provided the profits are not related to inside information.
“This is information from outsiders,” he said.
The problem is, stock compensation is supposed to align executives with the broader fortunes of the company. In the case of GameStop and BlackBerry, executives and insiders seem to be taking advantage of the frantic speculation in the companies’ stock – not a real improvement in their business.
“Boards can use their pulpits and tell their executives it’s really not a smart time to cash in their shares,” said Gorman. “But that doesn’t mean those executives who sit on all these stocks are going to listen.”