PeopleSoft chairman sells on schedule
Dave Duffield is among the growing number of officers and directors at publicly traded companies who have turned to a specific schedule for selling a set number of shares.
Duffield is among the growing number of officers and directors at publicly traded companies who have turned to a specific schedule for selling a set number of shares on a specified time table under Rule 10b5-1 of the Securities and Exchange Commission, said insider trading analysts. The interest in selling shares under this method comes as corporate America faces a growing number of shareholder lawsuits over improper insider sales, the analysts note.
And these days, PeopleSoft is under a magnifying glass with its investors. The business applications software company is amid an effort to conclude its $1.75 billion acquisition of J.D. Edwards. But it's also in the middle of a contentious battle with Oracle, which made a hostile multibillion-dollar bid to acquire PeopleSoft.
"By setting up a regularly scheduled program to sell shares, it helps officers and directors achieve some insulation from shareholder lawsuits," said Lon Gerber, director of insider research with Thomson Financial.
Duffield, for example, sold 25,000 shares Wednesday--the day Oracle raised its hostile bid for PeopleSoft to $19.50 a share from its initial offer of $16 a share.
And on June 11, Duffield, also a PeopleSoft director, sold another 25,000 shares on the day before PeopleSoft's board rejected Oracle's hostile bid of $16 a share.
On first blush, the timing of Duffield's sales may seem strategic. But for the company chairman, his insider sales have come on a regular Wednesday weekly schedule with divestitures of 25,000 shares a pop, Gerber said.
A PeopleSoft spokesman declined to comment on Duffield's personal stock sales, other than to note the company chairman sells his PeopleSoft stock on a regular scheduled basis.
Rule 10b5-1 took effect in October 2000 and insiders have expanded its use from a quarterly and monthly basis to weekly, insider trading analysts said.
"There is a certain logic to selling weekly because you can average out the prices you receive," said one securities lawyer.
Although insiders can still sell shares outside the designated times and amounts that they stipulate in their 10b5-1 schedule, the attorney noted those shares are at greater risk of catching the attention of litigious shareholders.
Corporate scandals from Enron, WorldCom and ImClone Systems have created this rippling affect among companies in all industries, as shareholder lawsuits have risen over allegations of improper insider trading.