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Apple Inc. Message Board

  • squeezetracker squeezetracker Jan 18, 2013 10:09 AM Flag

    Board member Al Gore just bought 59,000 shares... Implications

    Gore bought and added the 59,000 underlying shares (worth $29,500,000 today) to his prior holdings. This was a simple exercise (not a cashless exercise), but there are several nuances. First, unless you assume he is as gumptarded as the unhedged shorts on this board, it is obvious that the BOD members had no idea the stock was going to be pounded to such uneconomic levels since October or he would have surely exercised these old options last year. Second, the old rules for inclusion of the ITM portion at exercise in AMT (but not ordinary income) will be far better this year than last. Third, when ISOs are sold, the ITM portion at time of exercise will be included in ordinary income, and the sale price excess over the market price at the time of exercise (so here, $500) is the capital gains portion.

    So, beyond having good tax counselors, why would a board member buy and hold all of those beauties today? Do you think maybe Al has a good idea of what is coming up for AAPL and that he believes the downside is washed out? I'll suggest he did it for one reason only: he thinks the stock is going alot higher from here and he wants as much of the the end game gain to be in the form of LTCG. Read that slowly if you are not a numbers/tax oriented player, but this is a very comforting data point... and certainly more informative than maybe AAPL is swithcing big pad screen suppliers, changing the configuration/glass, has all the iPad 4 inventory they need for the schedule run, or whatever. We're pretty sure they will continue to make a full sized iPad. LOL

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    • you don't know what you're talking about........he did not 'buy and add'.......he exercised his option on 59000 ~$7 options given to him over 10 years ago by jobs, as a board member.......he spent ~440K to reap ~30m in the transaction......done, he's out of aapl it?

    • What a shame that everyone on this board can't post only factual information like this. If only the media could do the same. The outright lies that they have told and the damage that has been done is humongous. I can't believe how many people sold their stock because of it. I bought in at $65.00 per share and am still holding. Some how the investing community are holding apple to a higher standard. The stock is so undervalued now it is absurd.

      • 2 Replies to rmugge
      • The "media" is part of the game. It ain't no accident who they have on their shows, and WHEN. And of course, let's not forget the millions they pocket each year running all those brokerage commercials. (not to mention which brokerage is short, and which is long....) etc etc etc ..... Wall St. ..... the best game in town ! (and the only watering hole around for all those thirsty lions)


      • this dislocation will be over in a few days. the street is playing possum with the media and shaking out all the cheap shares they can...

        squeeze, deagol and Horace are all very knowledgeable, intensely studied and capable guys. They see iphone sales between 48m (squeeze) and 55.5m (Horace), revenues between $58B (squeeze) and $60B, and significantly better margins than guided.

        To get the stock back on track -- and KEEP IT THERE -- aapl needs to not only execute well, but also to far more carefully manage its IR effort. Most importantly, if it is going tosandbag guidance, it needs to do that very consistently to avoid alienating itself from buyside analysts and PM and also to protect sellside analysts. Squeeze has made this point well and so are many others lately.

    • Here's the Easy Reader version: Gore's pre-earnings exercise, 2.5 months early, tells you he thinks the earnings release will have a "significant" upside influence on the stock. I say that because he troubled himself and likely the general counsel and outside securities counselors for AAPL prior to exercising to "buy" well past the safe harbor period (see details below re AMT, LTCG, charitable contribution considerations and ordinary income rates).

      But it is more than that. If he thought the report would have a "not that significant" impact on the stock price, he would have simply waited for the report to be out and then exercise next week. It would not have required the hoops and hurdles and documentation issues his exercise timing created for those involved.

      Moreover, the timing of this filing signals that there is essentially no risk that AAPL is going to report revenue or EPS numbers below consensus, a crimped margin, or anything remotely disconcerting for shareholders or the stock price. If Gore thought there was any risk of seeing the stock drop from the current level after attending the October, November and any telelphonic meetings to authorize say a deal with say China Mobile, then he would have to be retarded to have exercised prior to that negative news slamming the stock down hard. As explained in far more detail below, if bad news was coming to slam the shares, he would have waited until AFTER the release because it would have minimized the portion of his ultimate realized gain that would be subject to ordinary federal income tax currently at 39.6% and also minimized the amount of that gain that would be in the form of LTCG and taxed in the federal return at just 20%.

      Read the entire thread to learn more if you care, but don;t sell out your shares before earnings without thinking about what I have detailed with your eyes WIDE OPEN.

      • 2 Replies to squeezetracker
      • if you are long, read that if you missed it. Again, the math is straightforward for Gore... my sense is they wanted to get this done before the stock rips higher. Up $100/share on the week (consistent with Demark's modeling of up 22% over the next couple of weeks and knowledge of key institutional players' thinking), Gore's exercise will have saved him roughly $1.2M of Federal income taxes. Read more below for an introduction to these nuances.

      • I understood your point the first time, squeezetracker, but your easy read version reinforced it nicely. It's a shame that the media colors it differently. With all the never ending flow of negative press on Apple, I initially placed little importance on Gore's exercise as I thought CNBC stated that he simply exercised them now because he had simply ran out of time. I hadn't bothered to check the SEC filing until today based on your post. I was long and strong before this development, but feeling quite weary of all the bashing. You have made an excellent observation.

        Sentiment: Strong Buy

    • If you missed this earlier, as some asked thoughtful questions i expanded my discussion to make subtle points more obvious. If you aren't a fiance exec or tax guy, it may seem convoluted at the outset, but read the entire thread and you'll be able to say to yourself, "Wow, I read a lot of BS here but that was really interesting -- and internet inventor bigAl really did send the market a telegraph for those who missed the Demark siren re Tuesday's prelaunch into Wednesday's up 10% earnings call.

      Dial in friends.

    • Read this update only after reading the rest of my posts on this thread... but Gore's timing for this buy now as compared with after the 23rd will have the effect of saving him the difference between ordinary income tax rates (39.6%) and 20% LTCG rate on whatever the price differential is between his $485 exercise price and what the stock runs up to after earnings prior to when he would have needed to exercise the options at the latest prior to the March 2013 expiry.

      So let's use Demark's (timing call) estimate that AAPL is going to run up 22% or to ~ $600 within a couple of weeks from that. Rounding down to just a $100 differential, that means, all else being equal, old fox Al Gore will save this much in taxes when he ultimately sells out the shares:

      59,000 shares x (39.6 -20%) x $100 = $1,156,400. Not bad for a 1 week time shift, huh?

      Thanks for the wink on earnings next week big Al. LOL

    • gore is free to sell the shares at any time. these are itm options he has exercised. hope this helps.

      The Basics
      What is the rule?

      Section 16 imposes restrictions on when and how a corporate “insider” may buy and sell shares of
      company stock.

      Who does it apply to?

      “Insiders,” defined as officers, directors, and more than 10% shareholders are covered by the rules.
      What is the impact of Section 16?

      An insider is prohibited from “short-swing” transactions (i.e., a sale and purchase of company stock
      within a 6-month period). The insider is required to surrender to the company all profits if such a
      “matching” transaction occurs. However, employee compensation and benefit plans can qualify for an
      exemption from the rules requiring forfeiture of profits.

      What transactions are exempt from liability?

      There are four basic types of transactions that can qualify for an exemption from liability under the shortswing trading rules of Section 16:
      ■ Discretionary transactions;
      ■ Grants, awards, and other acquisitions from the company;
      ■ Dispositions to the company; and
      ■ Tax-conditioned plans.

      In addition, the exercise of in-the-money stock options continues to be exempt from liability.
      (In-the-money stock options are options where the FMV of the stock on the date of exercise exceeds the
      option exercise price.)

      Reporting Obligations
      Insiders are required to publicly report their holdings and transactions in company stock.

    • This could be related to Gore getting a lot of cash from the sale of Current TV to Al Jazeera. Nothing more complicated than that.

      Sentiment: Hold

    • Why do you think he exercised early the very day the stock his 485. If the tax treatment is that he has to pay the difference between the exercise price and the market price for the day of exercise as ordinary income. his incentive is to minimize taxes by picking the low price. Any tax experts out there?

      • 2 Replies to johnnov22
      • I am a recovering (inactive) CPA, and do not hold myself out as an expert, but one of my points was answering the question you asked...

        To restate, when he sells, the delta on strike and market at time of exercise (not sale, exercise) will be taxed to him as ordinary income (aapl gets a tax deduction for that now), and the overline between the market price at time of exercise and the ultimate sale price is a capital gain (short term or long term depending on holding period).

        Recapping, Al plan is to minimize ordinary income at 39.6% and have the upside from $500 be taxed at the new long term capital gains rate of only 20%.

        He'll likely wait until it has run up a few hundred bucks and then donate enough to offset the taxes due on selling out the rest. It is a nice tax situation for the wealthy, no? And here is one of the world's biggest bleeding hearts taking advantage of it to MINIMIZE his future tax liability for adding no value to AAPL. LOL

        Still, they key point is the buy and hold -- there was absolutely no reason to do that unless he thinks the stock is going materially higher after next week's earnings. Before selling your stock on bs rumors or uncertainty about next week, think this part through carefully: the ISO options on his 59,000 shares did not expire until March -- so if Al thought the stock was going to get hammered further, he assuredly would have waiting until AFTER earnings because that would have further minimized the portion of the ultimate total gain that would be taxed as ordinary income (39.6%) and maximized the portion of the total gain that would be subject to LTCG treatment at the new rate of 20%.

        Grin all day into next week while the #$%$ short away.

      • yes, with options you have 3 choices. cashless sell so he has options at say $8 and it's $488, he gets $480 per share and pays ordinary income tax on that depending on his bracket. The 2nd is buy/hold all shares and he has to pay taxes on that $480 gain per share. Then if he holds those shares a year, that difference when he sells from $480 is a capital long term gain. Short term is before 12 months. Now the 3rd is buy/hold/pay for taxes with shares. Here he buys the shares and sells enough to cover the taxes so he isn't out of any money from pocket. Thus, say he has 100,000 options. Cashless sell = sells all 100K options/shares. 2nd he has 100K shares but owes taxes on all shares. 3rd option say he holds 50,000 shares and sells 50,000 shares to pay taxes so he's not out of pocket any money. Hope this helps. I had options on two companies I worked for and this is how it goes (at least for lower level employees). hope this helps.

    • Tracker is correct. Gore could not have sold his shares even if he wanted to if apple is expected to miss earnings. SEC would have him in handcuffs and orange jumpsuit soon after. He still owns the shares.

      Sentiment: Strong Buy

    • Big bump for the Tracker man.

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