AutoNation execs cashing out as stock jumps on 'cash for clunkers'
But Cash for Clunkers has been more than a boondoggle for auto companies and people trading in used cars -- it's been great for insiders, too. In a classic case of intended consequences, Wall Street has helped translate government support for the automobile industry into a nice mid-summer bonus for insiders. Executives at auto dealer AutoNation (AN) have used the boost given to the stock price to cash out of their holdings, and that's another sign it's too late to be long auto stocks.
According to SEC filings analyzed by DailyFinance, AutoNation insiders have sold $20.8 million in stock since the end of July, as the stock price has doubled since March. The selling was led by Michael Jackson, company Chairman and CEO, and Michael Maroone, President and COO, both of whom sold more than $9 million in stock. Four other insiders also sold stock in amounts ranging from a few thousand dollars to more than $800 thousand.
The transactions involved the use of company-granted stock options, so the total gains were less than the sale amounts. Still, the use of long-dated stock options with years until expiration should raise the antennae of observers who have curiously been watching auto stocks rally. The number of AutoNation executives who have used the rally to sell suggests that they're not as optimistic about the future of their company as Wall Street.
Cash for Clunkers, after all, is merely pulling future sales into the present by "increasing affordability" at a cost to taxpayers. At best, it's an attempt by the government to play for time on behalf of auto manufacturers and parts companies and the people at AutoNation -- who presumably have as good an idea as anyone about future auto sales -- likely know that the numbers their company reports will be filled with low-quality, non-repeatable business.
James Cullen edits and writes at CollegeAnalysts.com. He has no personal position in the stocks mentioned above.