Director offers during US earnings season

It’s earnings season on Wall Street. Many American companies have produced financial statements in the past month or so. It was also a busy month for director relations. Directors at Merck & Co., JP Morgan and Goldman Sachs sold shares just as the interim statements were released. Directors of other blue chips, including Coca Cola, bought shares in the company they run. Directors are not required to disclose why they bought or sold, but we may be able to review the interim results of these companies to assess whether directors are likely to be optimistic or pessimistic about the future. Let’s take a look at Merck & Co, the pharmaceutical and healthcare giant…

Are directors benefiting from Merck’s success?

On October 28, Merck & Co reported stronger-than-expected third-quarter sales and profits. The company benefited from a jump in demand for cancer vaccines and immunotherapy. Additionally, some analysts believe that as the pandemic recedes, increased hospital utilization would support Merck’s practice-focused drug portfolio. The positive Q3 results helped the stock price hit $100, the highest point reached in the previous 52-week period. Administrators had the opportunity to take advantage of the price momentum. On Oct. 31, company president Kenneth C. Frazier used options to buy 867,084 shares at $57.04, which he then sold at $100.44 per share, earning him a profit of 37 millions of dollars. The table below presents the other transactions carried out by directors exercising option plans (see EX in the Type column).

Investment Banking Sales Manager

JP Morgan saw a series of director sales in October. So did Goldman Sachs, whose CEO David Solomon sold $2.5 million worth of stock on Oct. 28. Many of these trades were option-related (see below), but we shouldn’t overlook the possibility that the sales reflect a lack of optimism about the future. On the one hand, higher interest rates could generate higher profits as banks earn more in terms of net interest income. However, these gains could be offset by a slowdown in investment banking activity. Indeed, JP Morgan reported lower net profit as investment banking activity fell amid continued market volatility. Third-quarter profits fell $9.74 billion. It wasn’t as steep as some analysts had expected, but a 17% drop nonetheless. Profits also fell at Goldman Sachs. The quarterly results, released on October 14, revealed…

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