Tom Konrad CFA
As a quick follow-up to my valuation of Maxwell Technologies (NASD:MXWL), it was not just CEO David Schramm who has been buying over the last couple of days. An astute reader brought my attention to five more insider filings on EDGAR:
| Insider | Position | Date | Shares bought | Holdings | Increase |
| David Schramm | CEO | 4/30 | 5,000 | 217,564 | 2.4% |
| Mark Rossi | Director | 4/30 | 20,000 | 84,664 | 30.9% |
| Robert Guyett | Director | 4/30 | 11,000 (option exercise) | 78,664 | 16.3% |
| Yon Jordan | Director | 5/1 | 5,000 | 33,997 | 17.2% |
| David Schramm | CEO | 5/3 | 2,000 | 219,564 | 0.95% |
| Burkhard Goeschel | Director | 5/3 | 5,000 | 27,997 | 21.7% |
| Mark Rossi | Director | 5/4 | 5,000 | 89,664 | 7.7% |
I’d normally ignore Mr. Guyett’s option exercise, as it does not greatly increase his exposure to MXWL’s share price, given that director options are often well in-the-money. However, 5,000 of Guyett’s options had an exercise price of $7.44, and the other 6,000 had an exercise price of $6.2. None of these options were due to expire in the next year.
By exercising these options, Guyett not only tied up his $223,200 of his cash for more than a year, he also gave up his right not to use these options. That right would be useful if MXWL’s share price fell below his exercise price, so he’s saying he is absolutely confident that MXWL will not fall below $7.44 in the next year. Further, he is choosing to pay tax on the immediate gain from exercise in 2012 rather than put it off until 2013.
That’s the downside. What is the upside of exercising the options now? I can think of two:
- If Guyett holds the stock for more that a year, and sells it at a profit, he will be taxed at the (lower) long term capital gains rate. This makes sense if he expects MXWL to be significantly higher a year from now.
- (This was my reader’s theory:) He may think this is the cheapest price he will see for the stock before the options expire in June and December of 2013, so there is less immediate tax involved in exercising them now.
Most likely, his decision was motivated by a combination of the two factors. That means Guyett is supremely confident MXWL will not fall below $7.44, and he’s pretty sure it will be significantly higher next year.
He’s not alone. Between the four of them, these insiders just put $628,350 down that says MXWL is headed up.
What do you think?
Disclosure: Long MXWL
This article first appeared on the author’s Forbes.com Green Stocks blog.
DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results. This article contains the current opinions of the author and such opinions are subject to change without notice. This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
