Critics keep saying Yahoo CEO Carol Bartz is selling stock.
They’re saying it because Yahoo has filed several Form 4s with the SEC that say Carol is “disposing” of stock.
The latest was filed October 2. Read it and you’ll see yourself that it looks like Carol sold 73,130 Yahoo shares worth $17.81 each on September 30.
If Carol really were simply selling Yahoo stock to line her pockets, it would be a serious problem. She’s supposed to keep her shares so that she has incentive to make their prices go much higher.
But both Carol and Yahoo insist she is not simply selling Yahoo shares and treating the company like an ATM. We believe them. You should too.
Here’s Yahoo’s explanation for what’s going on:
The transaction reported by Carol Bartz on Oct. 2 was not an open market sale of Yahoo! stock. Ms. Bartz filed a mandatory Form 4 on October 2, which shows Yahoo! withheld a portion of a restricted stock award, which vested on September 30, 2009, to satisfy Yahoo!’s tax withholding obligations in connection with the vesting of those restricted shares.
The terms of Ms. Bartz’s grant agreement, which was previously disclosed and filed, requires that Yahoo! will satisfy its tax withholding obligations in this manner.
Yahoo! is required to satisfy its tax withholding obligations. The withholding of shares to satisfy related tax withholding obligations is used at many companies in connection with restricted stock and stock unit awards because it is far more practical to manage tax withholding obligations this way than to collect cash from employees at each vesting event. We currently use this withholding method for all restricted stock and RSU awards, and it does not involve the sale of shares by the employees in the open market.
What does that mean in English?
It basically means that in the same way the companies most of us work for withold a portion of our salaries or cash bonuses to pay our taxes for us, Yahoo (YHOO) is withholding a portion of Carol’s stock grant to pay her taxes for her.
That’s not a big deal. Carol could dig into her pocket for the cash to pay the taxes each quarter, but it’s hardly unusual to do it this way.
Here’s how Carol explained herself at a press event in September.
” I didn’t sell anything. As part of my employment agreement, I got restricted stock throughout the year. The way this works is when it vests the company has to hold back shares to pay those immediate taxes. That’s just the way the process works. In fact, when I saw a stock sale, I said, “What? What did I do?” And I thought something happened. So unfortunately in the Form 4s it records as a sale. It’s basically, if I was supposed to get 100 shares, they keep 20 and I only get 80. And so it records as a sale and everybody thinks I sold. I haven’t sold one penny of Yahoo! stock. Thanks for asking because it pissed me off when they said I’d sold. I wouldn’t do that.”
Carol probably shouldn’t have said “I haven’t sold one penny of Yahoo! stock,” because whether its technicality or not, the SEC is going to make that statement look like a lie each time it publishes a Form 4.
Still, there’s really nothing for Yahoo shareholders to worry about here.