The CEO of one of the most popular public companies recently sold shares. The sale was criticized Wednesday as it was reported, but more clarification into the sale may be needed to clear up the confusion.
What Happened: A SEC filing showed AMC Entertainment Holdings (NYSE:AMC) CEO Adam Aron sold 312,500 shares at an average price point of $22.85. The sale comes as several AMC executives have sold shares of the movie theater company that saw a significant rise in its valuation over the last 52 weeks.
In the case of Aron, the sale was part of a Rule 10b5-1 trading plan.
The sale by Aron comes after it was announced in December he sold 312,500 shares in the company, which followed the sale of 625,000 shares in November.
Related Link: 5 Things You Might Not Know About AMC CEO Adam Aron
What Is A 10b5-1? Exchange Act Rule 10b5-1 was passed in 2000 by the Securities and Exchange Commission. The rule allows insiders at public companies a way to set up pre-approved plans to sell stocks they own. The rule was put in place to help insiders being accused of insider trading.
Rule 10b5-1 allows the sale of a predetermined amount of shares to happen at a predetermined time. Some Rule 10b5-1 plans are used to help cover executive’s compensation.
“This rule provided affirmative defenses for corporate insiders and companies to buy and sell company stock as long as they adopted their trading plans in good faith – before becoming aware of material nonpublic information,” SEC Chairman Gary Gensler said.
The SEC proposed changes to Rule 10b5-1 in December 2021. Gensler said the proposed changes would help fix “potential gaps in our insider trading regime.”
Among the changes would be cooling off periods added for insiders for a new or changed plan. The changes would also prohibit having overlapping Rule10b5-1 plans and would limit plans to sell shares one time to one plan every 12 months.
Why It’s Important: Aron took to Twitter on Wednesday night to share details of the transaction and that he announced this 10b5-1 plan back in August and had no idea when the sale would take place.
Back in August, I said that at age 67 I’d sell some AMC shares toward year-end, all trading decisions out of my hands, under guidelines of a Chase 10-b-5-1 plan spread over 3 months. Those sales are now all finished. I STILL OWN OR PLAN TO VEST IN 2,302,760 AMC SHARES. I am in!— Adam Aron (@CEOAdam) January 12, 2022
The SEC filing shows that Aron could have 780,915 shares issued based on “continued service” and 1,316,759 shares issued based on performance goals. Along with shares Aron currently owns, the CEO could own 2,302,760 shares in the future, something he highlighted in his tweet.
In December, Aron said that 62.5% of his annual pay is in AMC stock and he sold it as part of his “estate planning.”
As the CEO of a highly visible publicly traded company, Aron’s sales whether timed or part of pre-announced plans could be highly scrutinized.
Tesla Inc (NASDAQ:TSLA) CEO Elon Musk sold a portion of his holdings in 2021 in a move that was done for tax purposes. According to the filings, the shares were “sold solely to satisfy the reporting person’s tax withholding obligations.”
AMC has been a battleground stock attracting a large following of retail traders who rallied against hedge funds who were short the movie theater stock. AMC was one of the 10 most searched tickers on Benzinga Pro in 2021, which highlights how popular the company and its stock have become.
AMC sPrice Action: Shares are up 0.3% to $22.80 on Thursday. Shares have traded between $2.13 and $72.62 over the last 52 weeks.