Top Schwab, E-Trade Insiders Selling Big Blocks of Shares

Despite uneasiness over Asia and future profits of technology companies, the bull market in stocks has roared on, fed by demand from individual investors.

That is in no small part because these investors are able to buy and sell stocks inexpensively through such discount brokers as E-Trade Group Inc. and Charles Schwab Corp.

But in an intriguing development, top executives at these two brokerages have recently been heavy sellers of shares in their own companies.

It could be a savvy move by some of the nation's best readers of the market's health. It might mean that profits have peaked for on-line brokerages. It could mean chances of acquisition by a bank have cooled. It also might mean none of the above.

According to CDA/Investnet, a Florida firm that tracks stock transactions by company insiders, 10 executives at Charles Schwab either sold or filed to sell almost 2.6 million shares from Nov. 24, 1997, through Feb. 17.

The sellers included chairman and co-chief executive Charles R. Schwab, who last month notified the Securities and Exchange Commission of plans to sell 600,000 shares. Last week the Charles and Helen Schwab Family Foundation filed to sell 100,000 shares.

Meanwhile, at E-Trade, president and chief executive Christos M. Cotsakos intends to sell 188,008 shares. It would be his largest such move since the company went public in August 1996.

According to CDA/Investnet, the sale would cut Mr. Cotsakos' "actionable holdings" - common stock plus exercisable options-in E-Trade by 25%.

William Porter, E-Trade's founder and chairman, sold 50,000 shares and has filed to sell 50,000 more.

Industry analysts and company spokesmen maintain that the executives' decisions to unload stock may only reflect their wishes to lock in some profits.

But others wonder whether the extensive round of stock sales indicates that these sophisticated shareholders think the stock market has peaked.

"Insiders at brokerages are as close to the market as anyone can be," observed Bob Gabele, president of CDA Investment Technologies and chief analyst for CDA/Investnet.

A Schwab spokesman declined to offer any reason why Schwab executives would be selling stock but noted that Mr. Schwab's sale cut his stake by only 2%. E-Trade did not return phone calls.

Both Schwab and E-Trade share prices have stumbled lately after flying high for most of 1997. Schwab stock had slipped to $37.25 in midday trading Friday from its Dec. 8 summit of $43.4375; E-Trade had dropped to $24.125 from its Sept. 30 peak of $47.

E-Trade stock "got a little ahead of itself" last summer, said Bill Burnham, an analyst at Piper Jaffray Inc., Minneapolis. He nonetheless maintained a "strong buy" rating on the stock.

In recent months such rivals as Ameritrade, Fidelity Investments, and Quick & Reilly, which Fleet Financial Group acquired last year, all have cut prices in an effort to boost market share in on-line trading.

But most analysts still like the long-term prospects of E-Trade and Schwab. "They are leaders in this field and continue to grow extremely well," said James Marks, an analyst at Credit Suisse First Boston.

Although both these companies have developed the kind of retail business that banks would love to have, it appears unlikely that either will be acquired by a banking company anytime soon. Indeed, Schwab bought its freedom from former owner BankAmerica Corp. in 1987.

Selling big blocks of stock would make little sense if the insiders were planning to exchange their shares for another company's, analysts said.

Timothy F. McCarthy, president and chief operating officer at Schwab, has filed to sell 60,000 shares-more than half his stake, according to the Washington Service, a firm that tracks insider buying and selling.

Other Schwab insiders who have sold or plan to sell shares include: Tom Seiz, executive vice president, who sold 252,000; Luis Valencia, executive vice president and chief administrative officer, who filed to sell 90,000; chief information officer Dawn Lepore, who filed to sell 20,000; director Anthony Frank, who filed to sell 80,000; and Lawrence Stupski, a recently retired vice chairman who filed to sell 1.45 million shares.

Other E-Trade insiders selling stock include Kathy Levinson, executive vice president for consumer operations, who filed to sell 30,000 shares, and Keith Petty, business and legal consultant, who filed to sell 20,000.

Separately, some insiders at Banc One Corp. have also been busy selling. John C. Tolleson, former chairman and chief executive of First USA Inc., sold 2.8 million shares Jan. 22. Richard W. Vague, former president of First USA, sold 950,000 on the same day.

Banc One acquired First USA, a credit card specialist, last June. A spokesman for the banking company said January offered the first opportunity these managers had had to sell stock since the merger-but he added that the two executives remain "substantial shareholders" in Banc One.

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