Three days after the presidential election, James Gorman did something he hadn't done before in his six years as chief executive of Morgan Stanley: He sold stock.
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Mr. Gorman exercised options on 200,000 Morgan Stanley shares and sold them at $37.70 each, filings show. He sold another 100,000 shares later in November as the stock surged on the back of Donald Trump's victory, and late last week, he disposed of a further 285,000. Altogether, the Morgan Stanley boss realized a profit of at least $8.4 million, after taking into account the cost of exercising the underlying options.
Since Mr. Trump's election victory on Nov. 8, investors have pushed financial stocks to multiyear highs on expectations of lighter regulation, lower taxes and pro-growth economic policies. The KBW Nasdaq Bank Index is up nearly 20% since Nov. 8, about three times the gains notched by the broader market.
Executives at some of the biggest Wall Street banks have sold nearly $100 million worth of stock in that time, according to a Wall Street Journal review of securities filings. That is more in that same period in any year since 2006.
Executives have sold another $363 million worth of stock to cover the cost of exercising options and taxes, the filings show. That is nearly twice the amount sold for that purpose than in the year leading up to the election.
An added bonus: Some options that were about to expire worthless became valuable due to the postelection run-up. At Goldman Sachs Group Inc., for instance, the postelection bounce turned at least half a billion dollars worth of stock options into winners -- just days before some were set to expire.
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Further selling may be in store. Bank employees typically can't sell shares or exercise options in the run-up to earnings reports. The big banks finished posting earnings last week, meaning employees will now in most cases be free to sell.
Those sales won't be as apparent, though. Banks only have to disclose trades for a handful of top executives, although rank-and-file employees are paid largely in stock and options.
Share sales by corporate executives are often viewed by investors as a sign that insiders could be growing wary of valuations or be less confident in an increase in share prices. While that may be the case among some bank executives, the sales also follow a multiyear period in which they largely held on to moribund stock.
Some executives even doubled down during the depths of the postcrisis trough. Chief Executive James Dimon bought 500,000 J.P. Morgan shares in 2012 in the wake of the so-called London Whale trading blowup. Mr. Dimon bought another 500,000 shares in early 2016 as bank stocks were sliding. Mr. Gorman bought $2 million in Morgan Stanley shares in 2011, when the stock was at less than half its current price.
Now, with share prices and valuations rising, executives are acting. At Morgan Stanley, whose shares have risen 24% since the election, executives who have to report transactions sold more than $50 million of stock between Nov. 9 and Nov. 30, filings show. Many were the fruit of options granted to executives years ago when shares were trading at half their current value.
Those options allowed their holders to buy shares at big discounts to current prices. Last week, Mr. Gorman exercised options, granted in 2013, on 285,000 shares that allowed him to buy them at $23 apiece, according to filings. He sold the shares for $42.30 each, the filings show.
For options to be worth exercising, the stock must be trading above the so-called strike price, the level at which an option-holder has the right to buy it.
Before the election, Mr. Gorman had only sold shares to cover the cost of exercising his options, holding on to much of his stock in the process. After the latest sales, Mr. Gorman still owns 1.3 million shares, worth about $56 million. He is required by the bank to continue holding 75% of all share awards as long as he is CEO.
When he bought 100,000 shares in 2011, at about $20.62 apiece, Mr. Gorman planned to sell them if and when the share price doubled, which it did just after the election, according to a person familiar with his thinking.
Morgan Stanley shares recently were trading at about $42, slightly below their postelection peak.
J.P. Morgan executives who have to report the transactions collectively sold $20.5 million worth of shares since the election, filings show. At Goldman Sachs, executives at a similar level let go of nearly $25 million worth of their firm's stock.
Some of the selling at these banks has been from executives who have announced their retirements, including Morgan Stanley Chief Operating Officer Jim Rosenthal and Goldman Europe head Michael Sherwood. Other trades are pursuant to prearranged plans that schedule trades for certain times or price triggers.
And some have occurred as once-worthless options gained value. In late 2006, Goldman CEO Lloyd Blankfein and other top executives were granted options with a strike price of $199.84 that would expire 10 years later. By November 2016, with the expiration date approaching, Goldman shares were nowhere near $199.84. The week after the election, though, Goldman shares jumped above $210. The bank's shares now trade around $231.
Six current Goldman Sachs executives, as well as board member and ex-finance chief David Viniar, exercised 983,000 options, filings show. That represented 192.5 million shares that would likely have been worthless without the boost after Trump's election.
Another chunk of options set to expire later this year also have been pushed "into the money." All told, since the election, Goldman executives became eligible to buy at least $500 million worth of stock at below-market prices after a 33% rise in the share price.
There is one potential downside to the bank-stock rally. Firms recently awarded 2016 compensation based on stock that is suddenly higher in value, meaning employees received fewer shares or options that have higher exercise prices.
Write to Liz Hoffman at firstname.lastname@example.org and Tom McGinty at email@example.com