Bill Ford could have sold automaker stock for $18M. He paid $20M to keep it instead.
Bill Ford, executive chair of Ford Motor Company, dramatically expanded his personal investment in the automaker on Wednesday, according to a federal regulatory filing.
He opted to exercise nearly 2 million stock options granted to him as part of his executive pay package. A large portion of the options were set to expire soon and have no value after they expire.
Bill Ford could have sold for $18 million and gone home, but he didn't.
Instead, he paid $20.5 million to acquire the nearly 2 million shares.
Rather than exercise the options and sell the shares immediately to realize the gains, Bill Ford opted to exercise the options and buy the shares at the option price. In this case, he paid to acquire the shares and he also paid the associated taxes and fees rather than sell any shares to cover those costs.
If he wanted to cash out, he would have received the difference between the value of the stock options when they awarded and the value when the options were exercised. In this case, it would have been a pretax windfall gain of about $18 million, the company said.
The move reflects Bill Ford's confidence in the future of the company his great-grandfather founded in 1903, said Mark Truby, Ford chief communications officer.
By law, Bill Ford is allowed to purchase the stock at the price it was awarded because of how the stock option process is structured. To keep the stock, he must pay the original value at the time he received it. Ford exercised several tranches of stock options priced from $6.19 to $15.37, Ford confirmed.
The Ford Motor Company stock price has recently hovered around a 20-year high in the range of $20 per share. The stock closed at $19.81 on Wednesday, down from $19.96 a day earlier — yet more than twice the price from one year ago.
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Executives frequently exercise the options and get a cash payment of the value that stock has appreciated.
Meanwhile, Ford is now headed into an all-electric future, a decision with environmental implications that reflect core values Bill Ford has espoused for decades.
“The decision to acquire almost 2 million shares of common stock reflects Bill’s confidence in the future of the company and our plan to create tremendous value for all of our stakeholders," Truby told the Free Press on Wednesday.
"In this transaction, Bill is paying the exercise price for these options in cash to hold the entirety of the almost 2 million resulting shares of common stock without any shares sold to cover the exercise price, taxes, or associated costs.”
Elon Musk sells
Billionaire Tesla CEO Elon Musk has chosen to part with Tesla stock in recent weeks.
Musk sold roughly $5 billion worth of Tesla shares — "his first such sale since 2016 — just days after conducting a Twitter poll asking his 65.7 million followers if he should dispose of 10% of his stake in the electric carmaker," CNN reported Nov. 11.
Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock.
Do you support this?— Elon Musk (@elonmusk) November 6, 2021
According to federal regulatory filings, Musk exercised options and then sold nearly half of the 2.1 million shares he received, raising about $1.1 billion in cash to pay taxes relating to the transaction, CNN said.
Musk then sold another 3.6 million shares of Tesla stock, netting sales that were worth about $3.9 billion, the cable news network reported.
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Contact Phoebe Wall Howard: 313-618-1034 or phoward@freepress.com. Follow her on Twitter @phoebesaid. Read more on Ford and sign up for our autos newsletter.
This article originally appeared on Detroit Free Press: Bill Ford exercises stock options, pays $20 million to hold 2M shares
