Corporate executives can be just as foolish with their money as the rest of us.
That’s worth remembering as top officials at Twitter scoop up shares of their company’s stock. Omid Kordestani, a former Google executive hired last fall as Twitter’s executive chairman, bought nearly $2 million worth of Twitter shares this week, according to a securities filing. Chief Financial Officer Anthony Noto bought nearly $250,000 in stock.
When a company is out of favor with investors -- as Twitter definitely is -- stock purchases by executives and board members are considered a way to show how much management believes in the company. For example, as stocks of financial firms get kicked in the teeth, JPMorgan Chase CEO Jamie Dimon recently spent the equivalent of a year’s paycheck to buy $27 million of the bank’s shares.
But recent history shows the people who know Twitter best aren’t always useful barometers of the company’s stock market health. Last August, Jack Dorsey, who was interim CEO at the time, and several other executives or directors also made relatively small purchases of Twitter stock. Then, as now, investors were anxious about Twitter’s finances, stock price, management instability and inability to draw new users.
“Investing in Twitter’s future,” Dorsey posted last August on Twitter -- naturally -- along with a link to the securities filing that disclosed his stock purchase. That didn’t turn out to be the start of a Twitter rebound. Shares have fallen 35 percent since then.
Of course, a couple mini-flurries of stock purchases aren’t enough to suss out a pattern of insider signals. And it’s surely a better sign for the Twitter bosses to be buying company stock than to be dumping it in droves.
On that point, Twitter’s second-biggest shareholder, co-founder Evan Williams, has regularly been selling Twitter stock under an automated stock-trading plan. He sold about 10.4 million shares, or one-fifth of his total stock in Twitter, during 2015 -- a year in which the company's stock price fell 35 percent. So as far as market timers go, Williams has (inadvertently) proved to be rather astute.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Sometimes executives buy shares in their company to comply with stockholding requirements. That doesn't appear to be the case for Kordestani and Noto.
An aside: Four of Twitter’s 10 largest stock owners are individuals, not big investment funds. That is unusual. According to Bloomberg data, they are: Ev Williams (No. 2); Prince Alwaleed Bin Talal, the Saudi billionaire (No. 3); former Microsoft CEO Steve Ballmer (No. 5); and Dorsey (No. 8).
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