WORLD> America
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WORLD> America
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CEOs, famous investors hit hard by market plunge
(Agencies)
Updated: 2008-11-03 08:26 A growing number of executives at companies including Boston Scientific, XTO Energy Corp. and Williams Sonoma Inc. have been forced to sell stakes in their companies to cover stock loans to banks and brokers. The company stock was used as collateral for those loans. The falling prices triggered what is known as a "margin call." "A decrease in insider ownership is bad for corporate governance," said Ben Silverman, director of research at the research firm InsiderScore.com. "Then executives' interests are less aligned with their shareholders." Investors in Chesapeake Energy Corp. were recently faced with the surprising news that company CEO Aubrey McClendon was forced to sell almost 95 percent of his holdings -- representing more than a 5 percent stake in the natural gas giant -- to meet a margin call. His firesale of more than 31 million shares, valued at nearly $570 million, put downward pressure on Chesapeake's stock in the days surrounding the mid-October transaction. McClendon has called this a personal matter and said he would rebuild the ownership position, according to Chesapeake spokesman Tom Price. Redstone, the famed 85-year-old chairman and controlling shareholder of CBS Corp. and Viacom Inc., was forced to sell $233 million worth of nonvoting shares in those companies. That was done to satisfy National Amusements' loan covenants, which had been violated when the value of its CBS and Viacom shares fell below required levels in the loan agreements. National Amusements is Redstone's family holding company, and the stock sales represented 20 percent of the holding company's CBS shares and 10 percent of its Viacom shares. A spokesman for National Amusements declined to comment. Certainly some of the biggest investors aren't happy with recent market events. Earlier this year, billionaire Kerkorian's investment firm Tracinda Corp. paid about $1 billion, at an average share price of near $7.10, for about 141 million shares in Ford Motor Corp. That represented a 6.49 percent stake in Ford. Those shares have tumbled as the automaker's financial condition weakened considerably amid slumping sales and tighter credit conditions. That drove Tracinda to disclose twice in recent weeks that it was selling some of its Ford stock -- one batch of 7.3 million shares sold at an average price of $2.43 each, and the other for 26.4 million shares at an average sale price of $2.01 each. That means for about a quarter of his total Ford holdings, he got $71 million. Tracinda spokeswoman Winnie Lerner declined to comment. Activist investor Icahn faces an equally ugly situation with his investment in Yahoo Inc. earlier this year, when he bought about 69 million shares for a nearly 5 percent ownership stake. As of June 30, those shares were valued at about $20.60 each, according to a regulatory filing. Over the summer, he fought hard to get Yahoo's board to agree to a takeover by Microsoft Corp., a deal that never went through. As a concession, Icahn got a seat on the Yahoo board for himself and two allies. But his Yahoo holdings are off sharply, with the company's shares trading around $13 each. That means he's down more than $500 million since late June. Icahn didn't respond to a request for comment. As Tuck's Hansen notes, the current market conditions are serving up a reality check -- not just for individual investors but for the biggest names around. "Fishing isn't called catching, and investing isn't just called making money," Hansen said. "We have to remember that things can go down by a lot."
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