Few company leaders are getting a buzz quite like Satya Nadella at the moment. Microsoft’s CEO has led the company through the kind of growth period few could predict five years ago. However, is his decision to capitalize on Microsoft’s most recent performance a sign that this is as good as it gets?
Last month, the company announced a bonanza fiscal 2018 financial performance. Microsoft’s share has risen to new heights after the company smashed through the $100 billion revenue barrier for the first time.
Profit was high and just about all major company divisions have excelled. Right now is a good time to be a Microsoft shareholder. However, breaking several records means many think this may be the best Microsoft we will ever see.
Because of this feeling, many shareholders have been selling their shares, capitalizing on the record price. Selling now means all shareholders are making money on shares they previously purchased. Interestingly, one of the shareholders cashing in is Satya Nadella himself.
The CEO has sold 328,000 shares and raked in an impressive $35.9 million in the process. While we could argue that Microsoft’s record financial performance over the last year could be a prelude to more record-breaking in the coming years, some investors are unconvinced.
We can see a situation where Microsoft’s performance continues to break records. Again, investors disagree, which in the grand scheme is both normal and understandable.
However, it is perhaps a concern that Nadella is one of the investors selling off a large number of shares. Does this show Microsoft’s own CEO believes the company has reached a ceiling?
It is worth noting that over the last six months no direct-owner shareholder has sold more shares than Nadella. More importantly, the CEO sold those 328,000 shares in a one-week period this month. As can be seen in the image above, next on the list was Margaret Johnson, who sold 47,000 shares over the last two weeks. Both shareholder capitalized on a record-high share price.
Again, the question comes down to whether Satya Nadella believes this is the best Microsoft is ever going to be, or if the share sale is for another reason. Certainly, the CEO has sold shares before, when Microsoft was not quite in the high-flying position it is now.
Back in 2014, Nadella offloaded 143,000 shares for just $8.3 million. This time, both Nadella and Microsoft insist the sale is for financial planning:
“The stock divestitures made today were for personal financial planning and diversification reasons. Satya is committed to the continued success of the company and his holdings significantly exceed the holding requirements set by the Microsoft Board of Directors.”
This is perhaps evidenced by the fact Nadella has arranged a schedule of future share sales over the next two years. Over that time, he will offload just less than half his total shares in the company. Exceeding the holding requirements Microsoft mentions in the above statement is noteworthy.
The company demand Board members hold a specific amount of shares. Nadella currently has well over one million shares in the company.
Many of Microsoft’s core institutional holders are also sticking around for the time being. While shares will move around, the largest holders in the company are waiting, at least for the time being.
Of course, Satya Nadella has the right to sell shares for his personal financial planning, but there are certainly some people speculating he is providing direct proof the company may have reached a peak.
Incidentally, Microsoft’s largest direct shareholder is former CEO Steve Ballmer, the man Nadella proceeded.
It’s stoking a fire that maybe isn’t there, but does this show the former CEO has more faith in the long-term performance of the company than the current CEO?