Mary Barra, Chairman and CEO of General Motors, sold a large amount of stock. It's a bullish sign.
Bill Pugliano/Getty ImagesGeneral Motors Chairman and CEO Mary Barra recently sold a large amount of stock. Some investors don’t like to see executives selling, as it indicates an apparent lack of faith in the shares, but in Barra’s case, her sales are actually a bullish sign.
Barra used options to buy 1.3 million GM (ticker: GM) shares on March 22, paying $31.32 each for the so-called exercise price of the options, totalling $31.4 million. That day, she sold an equal number of shares of the auto giant on the open market for a total of $75.5 million, a per-share average price of $57.97.GM didn’t make Barra available for comment on the stock sale.
According to a form Barra filed with the Securities and Exchange Commission, the exercise of the options and sale of stock were conducted through a Rule 10b5-1 trading plan. Such a plan automatically executes transactions—purchases or sales—when certain preset conditions, such as stock price and volume, are met. Trading plans are meant to remove any potential bias a company insider may have from knowledge of material nonpublic information.
Yet, a plan itself indicates that an insider wants to make transactions, and the prices at which they are made show what they think is a fair valuation.
It’s unclear when Barra set up the trading plan, but she had planned sales of 1.75 million GM shares from Nov. 11-23 last year for $74.5 million, a per-share average of $42.57. Over that span, she exercised options for 1.6 million shares, also through a trading plan.
Before that, though, Barra’s last sale on record was in May 2013, when she sold 8,000 shares for $252,847, or $31.61 each on average. At the time, she was a senior vice president. Barra assumed the CEO role in January 2014, and added the chairman title in January 2016.
Her first year as CEO, 2014, saw shares fall 14.6%, while the S&P 500 index rose 11.4%. Every calendar year since, GM stock has underperformed the index. Other particularly bad comparisons were 2018, when shares tumbled 18.4% as the index slipped 6.2%, and 2019, when GM stock managed a 9.4% rise as the index surged 28.9%. The share performance was indicative of the challenges that Barra faced.
We noted that over those years she was tasked with remaking GM, selling the underperforming European division, and pushing toward electric vehicles and autonomous-driving technology. Profit margins improved under her watch. Last June, we named Barra one of our top CEOs when, in the face of the coronavirus pandemic, GM stock rose 13.8%, compared with the S&P 500’s gain of 16.3%.
This could be the year that GM stock beats the index. In March, shares topped $60 for the first time under Barra’s tenure, and ended the first quarter with a 38% gain, while the S&P 500 managed a 5.8% rise. It’s the second consecutive quarter of crushing outperformance. GM stock soared 40.7% in the fourth quarter of 2020, trouncing the index’s 11.7% gain.
In our profile of Barra, we noted: “She has done all an investor could ask for, even though the market hasn’t rewarded her efforts. Yet.”
GM stock has now outperformed for a running year—after a 43% plunge in the first quarter of 2020, shares have beaten the index every quarter. The CEO has been enriching investors, some who have been holding GM stock through some thin years.
It’s time for some normalcy at GM. One of the most normal things at a healthy, growing company is a CEO who exercises stock options and sells shares regularly through planned transactions. It’s an apt reward for Barra to monetize the stock that has surged on her hard work.
Inside Scoop is a regular Barron’s feature covering stock transactions by corporate executives and board members—so-called insiders—as well as large shareholders, politicians, and other prominent figures. Due to their insider status, these investors are required to disclose stock trades with the Securities and Exchange Commission or other regulatory groups.
Write to Ed Lin at edward.lin@barrons.com and follow @BarronsEdLin.
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April 04, 2021 at 06:00PM
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GM CEO Mary Barra Sold a Large Amount of Stock. Here’s Why That’s Bullish. - Barron's
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