Personal Finance & Money Asked on January 24, 2021
Lukas Walton offloads stake in First Solar shares
First Solar (NASDAQ:FSLR) announces secondary offering of 8.65M common shares from Lukas T. Walton, or approximately 8.2%, of the Company’s outstanding common stock.
Why would Lukas Walton do this? Telling the world you are selling 8.2% of a company’s outstanding stock seems like it will cause a market crash (because there’s more shares being traded now, plus people will speculate that you think FSLR’s prospects are not good), which is indeed what happened, FSLR crashed by over 10% yesterday. If the stock price crashes, then Lukas Walton also gets less money from the sale. It seems to his advantage to simply sell on the open market without fanfare.
What is the point of telling the world that you are selling such a substantial position?
Short answer: so he does not surprise when he actually sells. In your link, quite a bit key information regarding the sale is missing. The full announcement by first solar can be found here. The key part is this:
Mr. Walton intends to use the proceeds from the sale of shares in the offering to provide funds for new impact investments across a variety of environmental and social causes. In addition to the shares to be sold in the offering, Mr. Walton intends to donate up to 8,649,074 additional shares over time to various charitable organizations focused on urgent issues facing society and the environment, including relief efforts related to the COVID-19 pandemic.
Mr. Walton wants to invest big in social and environmental causes. He wants to fund that investment through funds currently bound in his ~20% stake in First Solar stock. It is clear that a sale of such magnitude would not go unnoticed and speculations would start, why someone is selling so much, others would follow and demand would freeze until the reasons are clear. Or it would take a long time to sell more or less unnoticed, and Mr. Walton wants to do good now (I assume, Corona aid does not make sense if you wait a year or two). So he puts his intention and more importantly his reasons to the public, so it is clear he is selling a fixed amount for reasons of social and environmental investment and additionally gifting the same amount (probably because it is just easier than selling the total). That way uncertainty, which stock markets hate like nothing else, is reduced, and he is advertising is philanthropic efforts.
Correct answer by Lars Wissler on January 24, 2021
As a large shareholder of First Solar (13.1% before the sale) Walton is considered an affiliate:
In the corporate securities and capital markets, executive officers, directors, large stockholders, subsidiaries, parent entities, and sister companies are affiliates of other companies.
As such, he is therefore required under SEC Rule 144 to report planned sales in advance:
Form 144 must be filed with the SEC when there's an order to sell a company's stock during any three-month period in which the sale exceeds 5,000 shares or units or has an aggregate sales price greater than $50,000.
The party filing Form 144 must have a bona fide intention to sell the securities within a reasonable time frame after filling.
Answered by Jaquez on January 24, 2021
SEC requirements aside, announcing the sale is to the seller's advantage because it helps keep the price a little higher.
If the owner of a large stake in a company were to sell their shares, simple supply and demand tell us dumping all those shares on the market will lower the price, and therefore reduce the profit from the sale.
Announcing the sale helps counter this by giving the shareholder a chance to explain why they are selling. This means the associated drop in price is less likely to spook other investors, as well as signal to others it's not a good time to sell their own shares. It's also a chance to drum up demand for the sale, as bargain hunters will see this as a chance to invest in those shares while they are more available and (perhaps) cheaper.
Answered by Joel Coehoorn on January 24, 2021
Lukas Walton is selling a large amount of of his shares, approximately 8.2% of the outstanding shares, which are not registered, in First Solar through a secondary offering. This requires a registration and prospectus listing details such as who the underwriter is and disclosure requirements associated with such a secondary offering. Since the company is established and current on SEC filings and the company receives none of the proceeds, the additional detail required is minimal.
After the sale, Lukas will own 4.9% of First Solar which, absent controlling interest in other entities that also own shares, will remove the requirement that he file annual statements since it is below 5%.
Alternately, Lukas could have sold shares gradually using Form 144. However, there are limits, based on average share trading volume to such sales which would have required a considerable time to sell the large amount of shares he holds. This would have raised questions as to why such a large shareholder was selling qtys. of shares near the 144 limit each time he filed a 144. Further, the registered offering, with strong disclosure requirements by both the shareholder and company allows coordination with underwriters to sell large amounts of shares with minimal market impact.
Through this secondary offering, Lukas has sold these shares on Sept 21 per SEC filing:
Upon the satisfaction of the conditions set forth in the underwriting agreement entered into in connection with the Registered Sale (as described in Item 6 of this Amendment), the Reporting Person sold such shares at a net price of $68.50 per Share on September 21, 2020.
See filings here:
Answered by doug on January 24, 2021
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