“It can be very concerning when an executive sells a ton of shares in their own company, but not every stock transaction is a reason to panic,” Chuck Jones writes for Forbes. “In talking with Martin O’Malley, Managing Director at Andersen Tax LLC, he said that when RSUs vest it is a taxable event that creates ordinary income that the employee has no control over.”
“When the 153,235 shares vested on May 1 at $93.74 it immediately created $14.36 million in taxable income for Ahrendts,” Jones writes. “Assuming a marginal Federal and State income tax rate of 50% she had a tax bill of over $7 million. O’Malley added that an employee has to decide well in advance of the vesting date if they want to net settle or pay cash which means they don’t know what the stock price will be and how much they would owe.”
“Keep in mind that Ahrendts’ Apple salary is $1 million and after paying taxes probably clears about $500,000. That isn’t enough to afford an executive’s house in Silicon Valley so ‘selling’ half the shares to cover the tax hit makes sense,” Jones writes. “In Ahrendts case she did not sell all the shares. In fact it looks like she only sold enough to cover the taxes. It is actually a bullish signal that she held the remaining 78,000 shares vs. selling them and walking away with a guaranteed $7 million in cash.”
Read more in the full article here.
MacDailyNews Take: Yes, of course.
Anyone who makes the sale of RSUs for tax purposes into a “bad for Apple” story either doesn’t know what they’re talking about or is trying to cast Apple Inc. in a bad light.
Tim Cook took home $10.3 million, Angela Ahrendts earned $25.7 million in 2015 – January 6, 2016
Apple’s Angelea Ahrendts makes her mark on Apple Stores by going ‘ultraluxe’ – December 8, 2015
Apple’s Angela Ahrendts emerges as highest-paid U.S. woman with $83 million – May 5, 2015
Apple’s retail chief Angela Ahrendts paid $73.4 million in cash and stock last year; BoD member Drexler steps down – January 22, 2015
No, Angela Ahrendts did not sell $5.3 million of her Apple shares – June 6, 2014
Apple’s new retail chief Ahrendts granted $68 million in restricted stock – May 6, 2014