Throughout the years, ServiceNow (NYSE:NOW) has proved itself as a dominant enterprise cloud computing company. However, a recent sale of NOW stock by CEO Bill McDermott is raising eyebrows.
According to a Form 4 filing submitted to the Securities and Exchange Commission (SEC) on Feb. 3, McDermott sold 53,993 shares worth $24.75 million on Feb. 1. The prices of shares sold ranged between $455.03 and $460.98. Following the sale, McDermott now owns only 3,600 shares.
This is a significant sale, as it represents a majority of the CEO’s stake. However, there’s more than meets the eye underneath the surface.
The sale generated controversy on social media, as McDermott had recently appeared on CNBC with an upbeat tone on the prospects of his company. Following backlash, McDermott disclosed he had sold the shares to fund a property purchase. This comes after the CEO purchased a $43 million Laguna Beach mansion in late 2021. During that year, McDermott received the third-highest pay among all S&P 500 CEOs, totaling $165.8 million.
CEO Bill McDermott Sells $25 Million Worth of NOW Stock
Macquarie analyst Sarah Hindlian-Bowler maintained her “outperform” rating and price target of $458 following the sale. She added McDermott has 56,000 shares lined up this year for time vesting and the right to acquire up to 32,000 shares if the average stock price exceeds $399.47. He also owns the rights to “up to 555,000 in longer-term performance-based stock options.” As a result, Hindlian-Bowler concluded the recent sale only accounted for about 10% of his total ownership. In addition, the transaction was McDermott’s first sale in two years.
When asked about the sale, a ServiceNow spokesperson said:
“It could not be clearer how bullish he is on ServiceNow and its future. ServiceNow stock is the majority of Bill’s compensation, and this is his first stock sale in more than two years. Bill retains a large equity stake in the company; in fact, as his equity awards continue to vest over the next 12 months, he will more than replenish the amount he just sold.”
On the other hand, VerityData’s Director of Research Ben Silverman takes issue with the sale. Silverman believes the sale implies McDermott thinks real estate is a better investment than NOW stock.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
