Stock underperforms STI as CapitaLand CEO sells another tranche of his shares
Call it the Mun Leong effect.
As CapitaLand chief executive officer Liew Mun Leong disposed of another tranche of his shares, the company's stock once again underperformed the Straits Times Index. This seems to happen every time Mr Liew or his wife sell their shares in the open market.
The disposal does not appear to have any informational content as it is part of Mr Liew's regular practice to cash in on his stock options. The market, however, seems intent on reading something into it.
Mr Liew sold 800,000 CapitaLand shares last Friday at an average price of $6.87. This reduced his shareholding in South-east Asia's largest real estate company to about 800,000 shares.
What followed has almost become a pattern.
Yesterday, the stock shed six cents to end the day at $6.60 - 0.9 per cent lower. That was the highest it had been all day, falling at one point to a low of $6.47. In comparison, the STI slid by a marginal 0.1 per cent.
Earlier in the month, Mr Liew also sold 800,000 CapitaLand shares. On that occasion, the stock underpeformed the STI by 1.3 percentage points. Mr and Mrs Liew have disposed of CapitaLand stock six times in the last one and a half years. On each occasion, CapitaLand had underperformed the STI by an average one percentage point the day after the announcement was made.
Someone close to Mr Liew quipped that he sold his shares in order to pay his income tax. 'He received quite a big bonus last year, you know.' According to CapitaLand's annual report, Mr Liew received a salary $1.15 million and a bonus of $5.35 million last year. Others said that he was merely monetising part of his remuneration.
A CapitaLand spokesperson said: 'Share-based compensation forms a part of his (Mr Liew's) overall remuneration package, which carries tax liability. It is prudent cashflow management for an employee to sell some of his shares after exercising his options, as he has to pay taxes based on the difference between the exercise price and the market price at that point in time. Besides, Mr Liew typically sells some of his shares after results announcement, and during a period when the company is not announcing any significant or new development that has an impact on share price.'
Most of the options exercised by Mr Liew in the last couple of years had exercise price of $3 or less per share.
CapitaLand in recent years has switched to awarding performance shares instead of share options. Mr Liew has some 400,000 performance shares deliverable to him after 2008, and another 300,000 after 2009. He also has some stock options outstanding.
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