Money Stuff: Lordstown Executives Had Good Timing

The basic problem is that, if you are a senior executive at a public company, you always know stuff about your company that the public doesn’t know, but you might want to sell stock sometimes. The main reason that you might want to sell stock is that you are compensated largely in stock and you need to turn that stock into money to pay for houses, college tuition, outside business ventures, etc. That seems fine. It is good for executives to be paid largely in stock (it aligns incentives), it is good for executives to be able to live in houses and send their kids to college, and so you need some mechanism to turn the stock into money.

Another reason you might want to sell stock is that you think to yourself “the price of my company’s stock is high, and it should not be, so I will sell it before the price goes down.” This is sort of an awkward reason to sell stock, and you will not generally see executives say this sort of thing. Still it is not technically illegal, on its own. If you think that the public has all the relevant information about your company and nonetheless overvalues the stock, I suppose you are free to sell on valuation concerns. It definitely happens, usually quietly, though Elon Musk occasionally says that Tesla Inc. stock is overpriced and then sells stock on Tesla’s behalf (though not generally from his personal account).