Hundreds of corporate executives and other insiders disposed of shares at a frenzied pace during the past two months trying to avoid what they thought would be stiff tax penalties. The value of the shares sold since November has topped $19 billion—the highest two-month total since just before the financial crisis in 2007, according to TrimTabs Investment Research.
"A number of people did sell this year, including through the exercise of stock options," said Matt Brady, head of wealth advisory at Barclays Wealth, Americas. "You could say they sold 'too soon' if they sold just because they thought tax rates were increasing in 2011."
Mr. Brady added that selling in 2010 was also a way to diversify holdings and take advantage of climbing stock prices. He said "the sale might well have made sense even though tax rates won't increase next year."
A big sale of stock this year locked in a capital-gains tax capped at 15%, the rate since 2003 and the lowest since 1941. That rate was set to rise in 2011, for many, the window of opportunity seemed certain to close.
The low rate will be in place for at least two more years now that President Obama signed the measure into law on Friday.
That's bad news for some recent sellers like Microsoft Corp. Chief Executive Steve Ballmer. He sold about 50 million shares of Microsoft for $1.34 billion, his company disclosed last month. Microsoft said Mr. Ballmer wanted to diversify financially and do some tax planning.
Other sellers include Microsoft Chairman Bill Gates, Berkshire Hathaway Inc. Vice Chairman Charles Munger, Philip Morris International Chairman and CEO Louis C. Camilleri, Heinz CFO Arthur B. Winkleblack, E.W. Scripps CEO Richard A. Boehne, and Hansen Natural Corp. CEO Rodney Sacks. Spokesmen for the executives either declined to comment or didn't return telephone calls.
The trend has prompted a surge in the ratio of insider selling to buying, with corporate insiders selling about seven shares for every one they have bought, according to Argus Research Co.'s Vickers Weekly Insider. That is the ratio's highest level since 2007.