At the Practical Contrarian we are always watching the markets and when Tim Cook sold 13% of his Apple stock for $88 million ($42M after taxes) we noticed a lot of questions buzzing on Reddit, Twitter and the internet in general. So why did Tim Cook sell a portion of his stock?
In a nutshell, it looks like Tim Cook exercised options that he was awarded as part of an incentive package back in 2020 when the stock was much lower. The $88 million of stock sold by Cook will most likely dilute the stock float for the owners of the company, with Apple neutralizing this dilution by buying back stock at current market prices.
Executive incentive programs in principle clash with the primary interests of the shareholders – the real owners of the company. When executives exercise options, the creation of new shares by the corporation dilutes the stock float by increasing the supply of outstanding shares.
Additionally, corporations afraid of the dilutionary effect from creating new shares will most often begin simultaneously buying back stock at higher market prices to offset the creation of new shares. This negative value created between the lower option strike price and current higher market price, in this case $88 million, is eroded from the value of the corporation.