TIE observation
Insider activity at TIE has come to a complete stop. No buying or selling for 4 months (Only exception was the CEO's wife's purchase of 50,000 shares in February.)
What activity there has been has been almost only purchases. In 1 year, the only sales have been November, 2006 when a Director sold 10,000 shares and in July, 2006, when another director sold 1500 shares.
But this is not about strong insider interest in the stock. It's about why activity has come to an abrupt halt.
Go back to insider buying. The CEO (Harold Simmons) bought shares as follows
12/06 50,000
11/06 20,000
10/06 200,000
9/06 150,000
8/06 100,000
7/06 484,000
5/06 200,000
4/06 50,000
3/06 307,000
You get the point. Every month for a year, the CEO has been buying shares. Not exercising options but buying shares.
Then he suddenly stops. 4 months of no buying.
Now consider a second point. Valhi just distributed TIE stock as part of its dividends.
VHI is nothing more or less than a Simmons owned shareholder of TIE (about 3.5% stake). A common complaint about dividends is that they are a form of double taxation: they are after company taxes and then the shareholder pays taxes on them as income.
Distributing the shares, however, is a form of non-taxable capital gains. So the shares go to the shareholder and tax is paid only once in the event they are cashed out.
I that what we are seeing: preparations for a buyout? Because TIE has had a phenomenal run: up 35X in 4 years. The upside going forward isn't going to be as strong. Perhaps it's time for Simmons to cash out.
TIE is mostly owned by Simmons and his family. VHI is 94% owned by Contran and the VHI CEO is non other than Harold Simmons. Contran itself is a holding company that is owned by - you guessed it - Harold Simmons and family.
Interestingly, the ownership is in the form of trusts.
Break down the TIE ownership today:
* Contran 35%
* VHI (before distribution) 3.5%
* Simmons (before distribution) 3.5%
A simple explanation is that Simmons buys to pump up the stock price. Not likely. He was buying plenty while the stock was racing up in 2005 and early 2006.
It does make sense if this is for a buyout:
1. He can't buy shares in the pre-sale period, neither can his Directors.
2. Moving shares back from VHI to Contran (and to direct shareholders) is a way to avoid double taxation in the event of a buyout. Contran is mainly held in trusts which will avoid much of the tax liability that a publicly traded corporation like VHI can not avoid.
What activity there has been has been almost only purchases. In 1 year, the only sales have been November, 2006 when a Director sold 10,000 shares and in July, 2006, when another director sold 1500 shares.
But this is not about strong insider interest in the stock. It's about why activity has come to an abrupt halt.
Go back to insider buying. The CEO (Harold Simmons) bought shares as follows
12/06 50,000
11/06 20,000
10/06 200,000
9/06 150,000
8/06 100,000
7/06 484,000
5/06 200,000
4/06 50,000
3/06 307,000
You get the point. Every month for a year, the CEO has been buying shares. Not exercising options but buying shares.
Then he suddenly stops. 4 months of no buying.
Now consider a second point. Valhi just distributed TIE stock as part of its dividends.
VHI is nothing more or less than a Simmons owned shareholder of TIE (about 3.5% stake). A common complaint about dividends is that they are a form of double taxation: they are after company taxes and then the shareholder pays taxes on them as income.
Distributing the shares, however, is a form of non-taxable capital gains. So the shares go to the shareholder and tax is paid only once in the event they are cashed out.
I that what we are seeing: preparations for a buyout? Because TIE has had a phenomenal run: up 35X in 4 years. The upside going forward isn't going to be as strong. Perhaps it's time for Simmons to cash out.
TIE is mostly owned by Simmons and his family. VHI is 94% owned by Contran and the VHI CEO is non other than Harold Simmons. Contran itself is a holding company that is owned by - you guessed it - Harold Simmons and family.
Interestingly, the ownership is in the form of trusts.
Break down the TIE ownership today:
* Contran 35%
* VHI (before distribution) 3.5%
* Simmons (before distribution) 3.5%
A simple explanation is that Simmons buys to pump up the stock price. Not likely. He was buying plenty while the stock was racing up in 2005 and early 2006.
It does make sense if this is for a buyout:
1. He can't buy shares in the pre-sale period, neither can his Directors.
2. Moving shares back from VHI to Contran (and to direct shareholders) is a way to avoid double taxation in the event of a buyout. Contran is mainly held in trusts which will avoid much of the tax liability that a publicly traded corporation like VHI can not avoid.
posted by Andrew at
10:29 AM
3 Comments:
Comments on IMA earnings Andrew? Market yawned!
andrew,
1) for tie, do you also consider the case that the owner simmon tries to own the company for himself ? In other words, he is trying to defend his own company. that's why he keeps buying the stock. what do think for that possibility ?
2) usually, how long is the pre-sale period ?
thanks
Simmons trying to own the company does not seem to really apply.
1. he would continue to buy not stop buying
2. VHI share distribution does not affect his control
Pre-sale period - Great question and I don't know. Even if they are just in talks, wouldn't they hesitate to do anything?
Post a Comment
Subscribe to Post Comments [Atom]
<< Home