TRID and shares
A few folks had questions, so I'd like to into more detail.
First of all, the SEC looked into this with TRID in 2004 and concluded that there was no wrongdoing.
A recent Wall St Journal article looked at option granting compared to most recent price. The idea is that companies are supposed to dole out options in a neutral fashion - they don't time them accordingto actual price movements. The WSJ looked for option prices that were significantly lower than recent prices.
They uncovered fraud and greed.
* Fraud - Vitesse was found to have backdated the options to find a date and price that was incredibly advantageous. That's wrong.
* Greed - UNH and TRID are too generous with options
Trident ignored the stock price when granting shares. They just said: your option strike price will be, oh, under a $1. That's not illegal, just greedy. (It is also very common - most Fortune 500 companies reserve special option prices for their top executives.)
As any shareholder of the stock knows, the recent proxy calls for another round of these overwhelmingly generous options.
If you look at recent insider trading, you will note that the execs at TRID have been selling a lot of their options for a long time. Is this a sign of impending doom? Are the rats leaving the ship and cashing out a la Enron? Not at all.
1. They have been doing it forever, regardless of company performance
2. They are repeating their greed and giving themselves more options
The impact will not be a re-stating of earnings. The impact is that 4 Executives are publicly embarassed for taking a large amount of corporate earnings. When they were a small company, they could get away with it. Now that they are a larger company, this type of behavior is more unacceptable. Maybe the new options grant that they want will be cancelled, which is in the company's and shareholder's best interests.
I don't like this behavior at all. And markets don't like surprises like this either. I am sitting on TRID. The product is fine - the management looks a little....greedy.
First of all, the SEC looked into this with TRID in 2004 and concluded that there was no wrongdoing.
A recent Wall St Journal article looked at option granting compared to most recent price. The idea is that companies are supposed to dole out options in a neutral fashion - they don't time them accordingto actual price movements. The WSJ looked for option prices that were significantly lower than recent prices.
They uncovered fraud and greed.
* Fraud - Vitesse was found to have backdated the options to find a date and price that was incredibly advantageous. That's wrong.
* Greed - UNH and TRID are too generous with options
Trident ignored the stock price when granting shares. They just said: your option strike price will be, oh, under a $1. That's not illegal, just greedy. (It is also very common - most Fortune 500 companies reserve special option prices for their top executives.)
Companies are allowed to set an option price at whatever number they want. The impact is that, when the options are cashed out, the company gets hit with a large non-cash expense. In effect, the earnings are artificially lowered.
As any shareholder of the stock knows, the recent proxy calls for another round of these overwhelmingly generous options.
If you look at recent insider trading, you will note that the execs at TRID have been selling a lot of their options for a long time. Is this a sign of impending doom? Are the rats leaving the ship and cashing out a la Enron? Not at all.
1. They have been doing it forever, regardless of company performance
2. They are repeating their greed and giving themselves more options
The impact will not be a re-stating of earnings. The impact is that 4 Executives are publicly embarassed for taking a large amount of corporate earnings. When they were a small company, they could get away with it. Now that they are a larger company, this type of behavior is more unacceptable. Maybe the new options grant that they want will be cancelled, which is in the company's and shareholder's best interests.
I don't like this behavior at all. And markets don't like surprises like this either. I am sitting on TRID. The product is fine - the management looks a little....greedy.
posted by Andrew at
1:02 PM
4 Comments:
But the stock still took a hit > 12% today. So after the investagation, they are not going to find anything out. Is it a buy opportunity?
I totaled up the CEO cash outs a few weeks ago and it came to almost $1B. For a $1.5B company, this concerned me.
TRID is down from $31 to $23 after phenomenal earnings and increased guidance.
At today's price, they will have a P/E of 38 next quarter. A P/E of 30 th eSeptember quarter.
All facts show that they have a fantastic product in the hottest consumer product - flat panel TVs.
I have bought them myself and will be loading up more if this persists. To me, this may delay the market giving TRID the valuation it deserves, but that valuation is inevitable.
Sure, a few ambulance chasers will file frivolous lawsuits - they are already starting. That will be distracting and costly, no doubt.
It was a BUY at $25, it is definitely a BUY at $23.
You are in business today Andrew! :) Btw, may be its just my personal investing style, but even though GRP does look interesting, it has just had its past quarter results released, did well, had the share shoot-up, then down partly due to profit-taking and partly due to market sentiment/crashing overall. The point of argument is could we rather invest that chunk in another hotter stock (something which has had great continuing momentum even in the gap bet. quarters). We could then come back in say about 20 days before the next earnings release? Any cons/comments?
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