What Jobs is doing is unfortunately not too uncommon.
Who buys the stocks back? The company. So if this is true the
Quote:
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which represents 4.57 million shares, or nearly $296 million,
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were sold back to the company.
This is unfortunate in that it can truly hurt a company's financial status. Apple paying $296 Million to the government along with Jobs $351 Million (if both were to cash out), that's $647 MILLION dollars Apple loses.
This is one reason American industry has taken such huge hits. It's not that the product didn't sell, it was the greed of the CEO's and Board of Directors cashing in on stocks and thus the company has little to no profit.
In some cases the company can turn around and sell those shares back to brokerage houses or hold them and release them when they need cash.... however, in a case like this where a selloff of 9.97 MILLION shares would be had.... it would free fall the price of the stock.
In a situation like this you also stick the government with ownership of a private company or a huge loss in tax revenue, while the CEO walks away with his.
We have abused the purpose of the stock market in the name of greed and it is one of the serious economic problems we face.
The stock market is supposed to be for people to buy shares of a company they believe in, and for the company to use that money to advance, update and become even more profitable. From there the stock is supposed to pay dividends to make a long term ownership possible and profitable. Then as the company becomes more profitable, the price of the stock rises as demand increases and people sell because there is demand and the company can take the hits.
What we are doing today is treating the stock market as a way to avoid taxes and make quick money at the company's expanse. People look at stocks for short term gains and many don't even realize that churning stocks (the quick buy and sells to make cash) hurts a company.
Here's an example: If I opened a company 30 years ago and I made widgets. I needed start up revenue so I sold parts of my company (stock). As I made money, that stock increased in value because of demand. I may have split the stock so that I could sell more. Original investors sell their stock which gets turned over quickly because demand is high. Also, as a way to keep people from selling, I offer dividends that are determined by my profit. I may even offer employees stock ownership to promote loyalty.
But NOW, present day, we see that people aren't buying stocks for the purpose to invest incompanies. They are eager for a quick turn around in their money. Companies no longer offer dividends like they use to. Stock has become a commodity in and of itself... people aren't looking for long term gains they want it now.
So back to my company. Now, I decide I don't really want to pay my fair share of taxes, so I take a pay cut and accept stock options. MILLIONS of them. 20-30 years ago CEO's did this so they had vested interest in the performance of the company and thus if the company profited they did, if the company sank they did.
However, today, I look at the market my widget stock has a P/E ratio of 30 (price to earnings ratio.... 10-20 is good, under 10 means the company probably is just starting and would be great long term..... 25 and over means that the price of the stock is overvalued and will probably crash)....... I think now is a good time to cash everything out, daddy didn't raise any fools.
So I cash in my option for 100's of millions and I now own all this stock. But to pay my taxes I give the government whatever percent. Now, I sit back wait for the stock to hit a price I like and I sell the maximum amount of shares.
Well demand isn't as great as what I sold, computer programs see a huge insider sell and they sell.... and the government before they can react.... just lost millions in revenue. I made mine, but the shareholders lose out because the price took a hit, the company loses out because money that was to go for R&D, payroll increases, new tech and growth.... has been decimated. The shareholders also lose out in that dividends, the money that could have gone to pay them is gone.
See, if I'm a CEO, and I just made $350 million on the sell of my stock and had whatever percentage withheld for taxes rather than making a pitiful $25 million a year in salary that is taxed, I'll do it.
Short term, the government won't say anything because they are making more in taxes.... long term I just put the company in serious financial straits. I'm still the largest shareholder and the board I pretty much get along with and hand picked, do the same thing sooooooo noone is going to kick me out and I can keep doing this until my company is dead.
What do I care, I have cashed out 100's of millions maybe a couple billion the past few years.... sure the company is hurting and employees are having to be laid off..... sure foreign competitors are using their profits for R&D and to improve but I'm set for the next 100 generations. The government sold their soul and maybe ok for awhile..... until the company crashes and all those workers and the communities that depended on those workers money can't put into the tax revenue coffers because they are all unemployed or making a lot less than they were.
This is one of those pesky conservative government types with tax cuts don't want you to know. It's also what those psuedo libs who want to tax more but leave little perks like this alone don't want you to know.
It's something every taxpayer in the US should know, should be pissed about and should demand something be done to prevent these abuses from continuing.