Good analysis as always from Matt Levine:<p><i>I am always skeptical that stories like this are actually about insider trading, just because it would be too dumb and obvious for Krzanich to dump his stock just before announcing bad news. Also: The news doesn't seem to have been that bad for Intel's stock, and in fact Krzanich's sales last year were mostly at prices below yesterday's close. As a diabolical plan it seems pretty unimpressive.</i><p><a href="https://www.bloomberg.com/view/articles/2018-01-05/citi-forgot-to-fix-its-money-laundering-systems" rel="nofollow">https://www.bloomberg.com/view/articles/2018-01-05/citi-forg...</a>
First Equifax, now Intel. Let's assume no bad faith. That means committees and control functions are failing to (a) appreciate the damage a security vulnerability (or exploit) can cause <i>and/or</i> (b) receive timely notice of said occurrences. We might need a new disclosure rule. Prompt disclosure whenever a material security vulnerability or hack is discovered.
The facts:<p><i>In 2017, he set up pre-arranged sales of 28,000 shares</i><p>And then in November he sold almost 900,000 shares.<p><i>on Nov. 29, Krzanich exercised and sold 644,135 options and sold an additional 245,743 shares that he already owned</i>
Anyone know whether there will be any repercussions for continuing to keep the flawed chips on the market, and for that matter continuing to sell these as of today.<p>I'm not talking about recalls of purchased product, just that Intel chose to continue to keep chips with <i>major</i> known issues on store shelves instead of choosing some other option.
The number of security events that have significantly affected stock values is very limited. Only equifax comes to mind.<p>If I recall correctly, Weev tried to short AT&T in advance of the iPad hack, but only got a tiny intra-day dip. The stock that week ended higher every day.<p>It is risky to short based on security mistakes. I am willing to give this guy the benefit of the doubt. I wish the financial markets valued security more. There just isn’t a lot of evidence to support that hypothesis.
<i>"People who are CEOs of companies like Intel don’t make mistakes like this."</i><p>Right. That's because this isn't a mistake, it's a criminal act with forethought.<p><i>"That sale decreased his overall holdings by about 50 percent, bringing his ownership level nearer to what he held at the end of 2013 and at the minimum number of shares he must hold under Intel’s ownership requirements"</i><p>That's pretty much all I need to read. The guy sold every share he could possibly sell without violating any contractual agreements and company policies that are/were in place.<p>Give him an orange jumpsuit and be done with it.
As we now know, insiders have been selling Intel shares long before the vulnerabilities became public. The impact is already baked into the price, whatever it was. So we'll never know whether Krzanich made money at the expense of his shareholders, but I can't imagine he thought no one will ask themselves that question.
Most companies would recall a product if it was unsafe, just to avoid the potential liability. However, the problem is that almost no guarantees are made in any way when you buy a product from Intel and any guarantees you think they made are immediately absolved of liability by legalese you "accepted" when you opened the packaging, etc.<p>Also, technically, their caches / tables still work as designed we just didn't understand that design very well.
Massive server slowdown requires more hardware to be used; AMD can't supply many servers, so it's a big win for Intel sales as they will sell many more servers than anticipated. IMO Krzanich is going to lose a lot on premature stock sales.
Brian Krzanich earns around $20 million p.a. at Intel. He sold 900,000 shares for about as much, total.<p>Even if he expected the stock price to be cut in half, he'd save just half a year's worth of his regular compensation. And Intel stock barely budged.<p>That would be an enormously stupid attempt at insider trading. Not only doesn't it pay very well. A CEO of such a company is closely watched by stockholder, the company's own lawyers, the media, competitors, and the SEC. The SEC regularly nails mid-level executives of unknown companies giving tips to their friends' dentists.
Doesn't the board have to approve all such sales months ahead? Just seems strange that people are acting as if he sold all he had and ran for the hills when the bad news were released.
Setting aside what the law currently is, why is it illegal? This WaPo article [1] always seemed spot on to me. For most of us, individual stocks are a David and Goliath thing, and there should be no illusion of equality.<p>[1] <a href="https://www.washingtonpost.com/news/wonk/wp/2013/07/26/insider-trading-makes-us-richer-better-informed-and-could-prevent-corporate-scandals-legalize-it/" rel="nofollow">https://www.washingtonpost.com/news/wonk/wp/2013/07/26/insid...</a>
Where's the line for material non-public information, vs something not obvious to most of the public, but discoverable through research?<p>Any engineer sufficiently motivated to do so could have examined a CPU at any time in the last ten years, and, through skill, access to publicly available information (the instruction set, cpu datasheets) and immense amounts of hard work, uncovered the Meltdown flaw, without any access to Intel's internal trade secrets.
The argument that his sales might’ve violated insider trading rules is puerile, populist, and patently absurd. The whole point of having pre-arranged stock sale plans is precisely this: so that execution of them does not leak any information whatsoever into the market. Think about it: if he had a pre-arranged plan and <i>didn’t</i> sell because he feared running afoul of insider trading rules ahead of a drop, it would have alerted other investors to the fact that something that spooked him was going on, and they would have preempted the unknown risk and rushed for the exit, crashing the stock.<p>In short, his is precisely why CEOs insist on these pre-arranged plans to make their stock grants and stock options valuable without causing them to incur the damoclean sword of being ’allowed’ to monetise only when they have absolute certainty that none of the no doubt innumerable problems they are aware of and paid to manage will leave negative impacts on stock valuations (meaning: never, making their stock worthless).<p>There’s nothing to see here.
Laws against insider trading should be abolished. The statutory prohibitions cause real economic harm by making markets less efficient, while there isn't actually anything immoral about insider trading. It's not fraud, it's a victimless crime, and markets getting non-public information faster is good because it allows faster correction of the allocation of capital to companies that are worth more or less than is publicly known. People who have knowledge of the deficiencies of a company should have an incentive to make the public aware of them and correct the price at the same time, and a trade does just that.