Jefferies Group Inc. (JEF) dropped as much as 11 percent in New York trading after Chief Executive Officer Richard Handler sold a $25.2 million stake in the firm to Leucadia National Corp. (LUK), its largest stockholder.
Jefferies declined 69 cents, or 5.4 percent, to $12.16 at 1:29 p.m. in New York Stock Exchange composite trading. Handler sold 2 million shares at $12.58 each, according to a regulatory filing today with the U.S. Securities and Exchange Commission. The firm had slid 52 percent this year through yesterday.
Handler said in a memo to employees, provided to Bloomberg News by an outside investor, that the stock sales were tied to the vesting of company stock awards that required “significant tax payments in cash.” Handler had taken on debt to pay the taxes because he had previously been restricted from selling any shares, according to the memo.
“While I am not happy about reducing my interest in our firm,” Handler said in the memo, “being out of debt is the prudent thing for me and my family in a turbulent world.”
Thomas Tarrant, a Jefferies spokesman, confirmed the authenticity of the memo and declined further comment. Handler, 50, didn’t immediately return a telephone call to his office in New York.
Handler’s sale of Jefferies stock was the first reported by the New York-based firm’s CEO since May 2006, according to data compiled by the Washington Service. He sold 278,960 shares at that time at an average price of $63.61 each for a charitable trust created to aid underprivileged youth, according to filings and a company press release at the time.
The sale to Leucadia, which reduced Handler’s holdings to 12 million shares from 14 million, may have avoided swamping the market. The average daily trading volume for Jefferies stock is about 1.83 million shares, according to data compiled by Bloomberg.
New York-based Leucadia reported in a separate filing that it now holds 56.5 million Jefferies shares, the equivalent of a 28 percent stake.
Leucadia “made a great buy,” Handler said in the employee memo, adding that he is “gratified by their belief in and support of Jefferies.”
Earlier this week, Jefferies said fiscal third-quarter profit fell 49 percent on a drop in fixed-income trading revenue. Profit for the three months ended Aug. 31 was $23 million, or 10 cents a share, excluding an acquisition, compared with an average estimate of 20 cents by eight analysts surveyed by Bloomberg.
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