Shares of ServiceNow Inc. fell in Monday trading after the company’s chief executive disclosed the sale of a large amount of stock.
CEO Bill McDermott cashed out nearly 54,000 shares, worth nearly $25 million at the time of his February 1 trading, according to a Securities and Exchange Commission filing after the closing bell on Friday. He has 1,933 shares of unrestricted holdings, with no options remaining after the transactions, according to the filing.
ServiceNow’s goods
CURRENTLY,
fell 3.6% in Monday trading.
Macquarie analyst Sarah Hindlian-Bowler said in a note to clients that she saw “no information about the business.” She relayed information from a weekend discussion with ServiceNow, in which she said the company indicated that McDermott had sold stock for personal investment in recently available real estate.
A spokesperson for ServiceNow confirmed to MarketWatch that McDermott sold stock to buy real estate.
A spokesman said: “It couldn’t be clearer than how optimistic he is about ServiceNow and its future. “ServiceNow stock makes up the majority of Bill’s compensation, and this is his first stock sale in more than two years. Bill still holds a large stake in the company; in fact, as his equity bonus continues to be awarded over the next 12 months, he will add more than he just sold.”
But to Ben Silverman, director of research at VerityData, McDermott’s sales looked “opportunistic” because he had refused to sell stock for the previous two years.
“It looks like he’s taking a position here trying to hit a high when he sells,” he told MarketWatch, as ServiceNow stock is “in recovery mode” from its quarterly lows. IV. Shares are up 17.1% year-to-date, after falling 40.2% in 2022.
Silverman, who tracks buyback patterns and insider activity, doesn’t think real estate investing is a “reasonable excuse” for selling such a large share of the unrestricted stock, not McDermott’s options.
“In fact, that makes it worse,” he told MarketWatch. Real estate is an investment, but so is ownership of ServiceNow stock. “What you’re saying is that he thinks investing in real estate is a better investment than ServiceNow stock.”
McDermott, head of SAP SE
SAP,
prior to ServiceNow, received a 2021 payment plan worth nearly $166 million, Silverman noted, and about $162 million of that was in the form of options or restricted stock.
However, he noted that the 555,000 long options McDermott has today are worthless as they will reach $679.76 in the next few years, while ServiceNow stock recently changed hands near $460 la.
“This is not his fault,” Silverman said, but the options are overvalued relative to the stock’s current price. They are stuck with the stock’s all-time closing high of $701.73 recorded in November 2021.
In Silverman’s view, the options review “doesn’t accurately represent his current equity exposure,” as ServiceNow’s stock price would need to “move significantly upward.” $679.76 so the options “have any real value to him”. Meanwhile, uninvested restricted shares are “not his yet”.
Silverman noted that Chief Commercial Officer Paul Smith sold all of her unrestricted holdings for about $1 million in January, and Chief Human Resources Officer Jacqueline Canney sold about 80% of her shares. worth about $500,000, at the same time.
“This is a company where the prevailing attitude toward stock-based compensation is to create liquidity, not increase equity exposure over the long term,” Silverman said.
