Did you see the Pfizer news this week?
No, I’m not talking about the company’s Covid vaccine announcement that sent the stock market surging higher on Monday morning.
I’m talking about the news that Pfizer’s CEO Albert Bourla sold 62% of his stock position in the company immediately after the announcement was released — collecting a cool $5.6 million before the stock gave back much of its short-term profits.
Talk about a timely trade! And one that certainly raised eyebrows in the media.
It’s certainly a suspicious situation.
A company makes a huge blockbuster announcement that sends the stock sharply higher…
But behind the scenes, the company’s highest officer is selling his shares to lock in profits and reduce his exposure to the company.
Doesn’t that sound like a conflict of interest to you?
Today, I want to explore what really happened with Pfizer’s CEO and his stock sale.
More importantly, I want to help you watch out for situations like this and protect your retirement from greedy executives who don’t have your best interest in mind.
It Wasn’t Illegal — But It WAS Questionable
As Bourla’s stock sale hit the news, people immediately started asking if the trade was kosher.
After all, the company’s top executive sold most of his shares immediately after his company released one of the most important news alerts for the markets in 2020.
Clearly, Pfizer’s CEO knew that this information would be coming out weeks (if not months) ahead of time. And his sale capitalized on the news as most investors were still learning about Pfizer’s new vaccine.
To say that Bourla had an unfair advantage over other investors would be an understatement.
But the stock sale wasn’t illegal.
Using a special type of transaction called a 10b5-1 sale, Pfizer’s CEO set up the stock sale several weeks before the vaccine news was released.
According to documents filed with the SEC, Bourla filed the transaction with a broker who was instructed to sell shares as soon as shares of PFE hit a certain price.
So when the stock surged at the open on Monday, this sale order was immediately executed.
Now I don’t mind a company executive selling some stock from time to time.
After all, it makes sense for CEOs to take profits when they help their companies succeed. And there are times when these executives need cash for expenses or big purchases.
But this particular sale strikes me as concerning for several reasons.
For starters, this wasn’t just a small bit of stock to help pay for a family vacation or a real estate purchase. This was a $5.6 million sale — and represented well over half of the CEO’s total position!
And while the transaction was technically legal, it was clearly set up during a time when Bourla was getting information about the eventual success of Pfizer’s vaccine.
He clearly had an idea that a pop in the stock could be coming — and this was information that the public didn’t have access to at the time.
Finally (and perhaps most importantly), Bourla now has a much smaller position in Pfizer, which leaves him with less of an incentive to help the company grow over time.
I like to invest in companies when a manager’s interests are more aligned with investors. And this major sale by Bourla is certainly concerning to me.
Everyone Looks Out for Themselves
When it comes to Wall Street and corporate America, it really is every man for himself.
As investors, we need to be aware of this and understand the implications.
Corporate CEOs are going to do the best they can for investors — as long as they’re set to benefit as well. It’s human nature!
Wall Street works the same way.
Investors all want to buy when they think they can make money from a company’s shares or dividends. And they want to sell when shares are overvalued or if they find better opportunities.
So you should always look carefully at what these important people do rather than just what they say.
Here at Rich Retirement Letter, I want to help you have a similar mindset.
I want to teach you to look out for you so that you’re able to make the best decisions to grow and protect your wealth.
I’m still a believer in shares of Pfizer.
After all, the company will still continue to pay you a lucrative dividend. And quite frankly, the coronavirus vaccine won’t be that big of a deal for Pfizer’s bottom line.
As an investor, I’m much more interested in the company’s existing drugs that will continue to generate reliable profits for years to come.
So if you’re invested in shares of PFE today, I would hang on to your shares for now.
But we’ll certainly keep an eye on the situation with the company’s CEO and look for any evidence of other questionable actions.