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Ballmer Sells Part of his Stake in Microsoft
An anonymous reader writes "The Financial Times reports that Steve Ballmer has sold part of his MS shares (my early morning math isn't very good, it seems a shade under 10%). Short of cash? Parking tickets? Or the start of a strategy to get rid of it all without causing too much upset in one go? No idea, but speculation is sure to be with us for a while."
No....the seahawks are owned by paul allen
Links to the Developers, Developers, Developers Steve Ballmer dance video.
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yeah but monty python has nothing to do with ballmer/microsoft (and they suck too btw).
He was making a joke on the "developers! developers! developers!" chant that ballmer does in his "dance like a monkey on crack" video
p.s. monty python sucks.
Step 1: President of global software company sells part of his hold in company.
Given: This provides an image of the president allegedly losing faith in his company and their projects. This may be an indicator for others to sell. Stock price-per-share drops.
Step 2: If the drop is enough, president re-purchases his previously sold shares of stock at a lower price.
Given: Everyone else scrambles to buy up what's left.
Step 3: Value skyrockets. Profit! (From leftover money in difference of higher-priced-sale and lower-costing-buyback, and then from the now even-higher-valued stock).
Informatus Technologicus
Interest group?
Ballmer wanted to sell his stock. He would not have been able to sell it unless there existed a buyer. He most likely sold the shares through a brokerage, which would have done the following:
1) Filled any orders from its own customers that could be filled against Ballmer's order. The price charged to those customers would likely be a little bit higher than the price Ballmer wanted to sell it for, since there is typically a difference (called buy/sell spread) in the price to buy vs sell a share of the same stock. The brokerage would have likely determined the buy price for its customers based on the best price available anywhere in the market (this is typically a part of the agreement between a brokerage and its customers). The difference in price becomes brokerage profit.
2) Assuming that once all of the Brokerage's customers' orders had been filled there were still some of Ballmer's shares left over, the Brokerage might buy some of the shares itself (they are cheaper than market price, because of the avoidance of the buy/sell spread).
3) If there are any shares left, the brokerage would likely attempt to fill any orders submitted to the electronic trading system (a computerized system that matches buyers and sellers). Again, doing this allows the Brokerage to keep the spread.
4) The remaining shares would be sold to one or more market making firms. Market making firms (or "Market Makers") are in the business of owning positions in a variety of stocks and profit based on the buy/sell spread when shares are bought and sold. Incidentally, competetive forces between market makers keep the buy/sell spread small, since most brokerages will typically do business with the market maker offering the best price.
I've just described what would happen if Ballmer decided to sell a relatively small chunk of stock (small enough that some people might talk about it a bit, and it might even appear on Slashdot, but not large enough to cause a major market movement). Suppose Ballmer wanted to sell ALL of his Microsoft shares...
If Ballmer wanted to sell all of his shares, he might expect to be able to sell them for $22 per share (for example). Suppose the market realized that this was happening. Prices would likely fall as people considered the impact of a large sell off. Opportunistic investors would quickly sell their own shares, expecting the price to fall further, and would plan to buy the shares back later once the price had fallen (there are also a variety of speculative financial instruments that would simplify executing this kind of strategy). Ballmer would now be unable to liquidate his shares for a reasonable price, because once the market knows that he is determined to sell, he'll have lots of competition.
Obviously, this would never happen, because it would greatly diminish the benefit of Ballmer's decision to sell, and would dissuade him from making the decision.
To accomodate this situation, Ballmer's broker would attempt to arrange the transaction behind the scenes, without the use of all of the machinery described above. This would likely take the form of a few phone calls to the large trades desk at other brokerages. "Psst. If you have a client interested in a large trade of MSFT, I might be able to help". The advantage is to be secretive so as to avoid giving away information that would tip off the market, while still finding someone to sell the shares to.
The eventual price of the shares would probably fall significantly below the market price of the stock. Why? To put it simply, liquidity costs money. It is still cheaper to use this approach than to try to sell a massive number of shares on the open market.
So, Ballmer may have made a life changing decision to sell all of his shares, or he may just want to diversify a bit, but his best move is always to sell it in small chunks in order to get the best price possible for the shares. As you can see, liquidity costs money.
Amazing magic tricks
He most likely sold the shares through a brokerage, which would have done the following:
1) Filled any orders from its own customers that could be filled against Ballmer's order. The price charged to those customers would likely be a little bit higher than the price Ballmer wanted to sell it for, since there is typically a difference (called buy/sell spread) in the price to buy vs sell a share of the same stock. The brokerage would have likely determined the buy price for its customers based on the best price available anywhere in the market (this is typically a part of the agreement between a brokerage and its customers). The difference in price becomes brokerage profit.
2) Assuming that once all of the Brokerage's customers' orders had been filled there were still some of Ballmer's shares left over, the Brokerage might buy some of the shares itself (they are cheaper than market price, because of the avoidance of the buy/sell spread).
3) If there are any shares left, the brokerage would likely attempt to fill any orders submitted to the electronic trading system (a computerized system that matches buyers and sellers). Again, doing this allows the Brokerage to keep the spread.
4) The remaining shares would be sold to one or more market making firms. Market making firms (or "Market Makers") are in the business of owning positions in a variety of stocks and profit based on the buy/sell spread when shares are bought and sold. Incidentally, competetive forces between market makers keep the buy/sell spread small, since most brokerages will typically do business with the market maker offering the best price.
I've just described what would happen if Ballmer decided to sell a relatively small chunk of stock (small enough that some people might talk about it a bit, and it might even appear on Slashdot, but not large enough to cause a major market movement). Suppose Ballmer wanted to sell ALL of his Microsoft shares...
If Ballmer wanted to sell all of his shares, he might expect to be able to sell them for $22 per share (for example). Suppose the market realized that this was happening. Prices would likely fall as people considered the impact of a large sell off. Opportunistic investors would quickly sell their own shares, expecting the price to fall further, and would plan to buy the shares back later once the price had fallen (there are also a variety of speculative financial instruments that would simplify executing this kind of strategy). Ballmer would now be unable to liquidate his shares for a reasonable price, because once the market knows that he is determined to sell, he'll have lots of competition.
Obviously, this would never happen, because it would greatly diminish the benefit of Ballmer's decision to sell, and would dissuade him from making the decision.
To accomodate this situation, Ballmer's broker would attempt to arrange the transaction behind the scenes, without the use of all of the machinery described above. This would likely take the form of a few phone calls to the large trades desk at other brokerages. "Psst. If you have a client interested in a large trade of MSFT, I might be able to help". The advantage is to be secretive so as to avoid giving away information that would tip off the market, while still finding someone to sell the shares to.
The eventual price of the shares would probably fall significantly below the market price of the stock. Why? To put it simply, liquidity costs money. It is still cheaper to use this approach than to try to sell a massive number of shares on the open market.
So, Ballmer may have made a life changing decision to sell all of his shares, or he may just want to diversify a bit, but his best move is always to sell it in small chunks in order to get the best price possible for the shares. As you can see, liquidity costs money.
Amazing magic tricks
Microsoft makes only about 10 billion in profits, so it's severly overpriced,
Um... that simplifies things just a little too much. There are huge issues that go into market cap and you really are looking at a longer term for stocks, not just one year.
And even if you do think that its a good stock measurement then why not buy Philip Morris? They have a Market Cap of 85.5 B and 2002 profit of 11 B (or a profit/interst rate of 13%). Good luck with the lawsuits.
The surprise isn't how often we make bad choices; the surprise is how seldom they defeat us.
According to the insider report at Yahoo, this is the first time Ballmer's done anything with his stock in over a year.
With MS stock price so low
Your logic would be correct if stock price was the only factor determining a stocks worth. Stock splits alone change the price of the stock, but not the value to a particular shareholder. What used to be a $50 for Ballmer is now twice as many shares for ~$25. It's essentially the same value. Considering his volume this is a great time to sell.
There is no longer anything that can be done with computers that is nontrivial and clearly legal. -- Paul Phillips
Not really. You can reduce risk by buying several different stocks carrying the same risk.
"Even a little diversification can provide a substantial reduction in variability. Suppose you calculate and compare the standard deviations of randomly chosen one-stock portfolios, two-stock portfolios, five-stock portfolios, etc. You can see from Figure 7-6 that diversification can cut the variability of returns about in half. But you can get most of this benefit with relatively few stocks: The improvement is slight when the number of securities is increased beyond, say 20 or 30."
["Principles of Corporate Finance", Brealey, Myers]
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MSFT: float is 8,940,000,000 shares
Balmer:
He sold the stock for $23.93 to $24.67 a share. After the transactions, he directly owned 431.6 million common shares.
Billy G:
As of 4/29/03: 1,183,499,336 Direct control
You can work out the % ownership yourself.
Slashdot reader SgtChaireBourne mentioned this 2 weeks ago in a comment titled Pump & Dump, in response to a post of mine saying that probably Microsoft code is difficult to maintain because Microsoft isn't fixing bugs.
According to SgtChaireBourne, selling of Microsoft stock by Microsoft executives is common. He said, "Both the frequency and volume of sales is increasing: They're all selling as fast as they get."
SgtChaireBourne pointed to the SEC (U.S. government Securities and Exchange Commission) list of Microsoft executive trades of stock. I looked around and quickly found an example. A Microsoft Group Vice President, Kevin R. Johnson, received 322,560 shares of stock and sold it the same day. He received 244,760 shares of stock on March 6, 2003 and sold that the same day.
SgtChaireBourne also said, "Don't forget that benefits [employee benefits at Microsoft] have been cut way back and there's also been outsourcing like mad. Consultants and contractors don't show up as layoffs when you let them go.
Earlier in this thread, RoLi said, "Microsoft executives know that Microsoft has a lot to lose and not much to gain. The only market where they are strong (the desktop) they have no room to grow, everywhere else they are losing (servers, embedded systems, gaming consoles)." (RoLi's comment #6030636.)
To this must be added that most people who bought a computer as powerful as a Pentium III 866 MHz won't buy another computer. The faster Pentium IIIs were good enough for almost everyone. I have often seen computers survive for more than 10 years. I have a voicemail computer with a 386 SX-16 processor that is perhaps 15 years old, and has been in continual use. The computer market is fast collapsing.
No, it's far more complicated than that. Especially for someone like Ballmer, who is likely hitting all the limits, like the AMT and $100,000 limits. There are incentive stock options, and nonqualified stock options. And there are many different exercise scenarios for each.
But in any case, the tax on these options, exercised several years ago, was already paid (for someone like Ballmer). So the basis in the stock is at bubble prices, and Ballmer likely will be able to show a capital loss.
If in the unlikely scenario that Bill Gates is found guilty of some crime I would also think ownership of the stock would have no bearing on whether he is guilty or not.
You are ignoring the fact that stock options issued to employees will dilute his holdings.
So hypothetically if they issue enough stock options for employees, his holdings can go from 50% to 11% without any sales whatsoever.