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Intel CEO’s Stock Sales May Warrant SEC Examination
- m3kw9 9y agoRight, so he sold at a time where the cpu flaws was already discovered and heat building up
- QAPereo 9y agoExactly. I stick by my prediction from the thread when this came to light... he’s going to prison or at least going to be ruined, and someone at the SEC is going to make their career. https://news.ycombinator.com/item?id=16067322 https://news.ycombinator.com/item?id=16067322
- RachelF 9y agoI doubt it. The very rich seldom go to prison, especially if they are US citizens at US companies. Intel can afford very good and very many lawyers for him. Intel may pay a fine to the SEC, after many years.
- QAPereo 9y agoThis won’t be Intel on the hook, or paying fines, and the SEC is the proverbial sleeping dragon. Do not pull the tail. They have a long arm, and high profile cases make careers.
- jjeaff 9y agoCNBC's American Greed is a good place to see how wealthy people are being prosecuted and sent to jail on a regular basis. Martha Stewart did some time for what appears to be much less than what the Intel CEO has done. And as far as the general public is concerned, she is much higher profile and was likely quite a bit wealthier than Brian Krzanich.
- didgeoridoo 9y agoNot quite — Martha Stewart was convicted of conspiracy, obstruction of justice, and lying to investigators. You can get away with a lot of things if you’re rich, but annoying federal prosecutors is rarely one of them.
- bduerst 9y agoI'm not sure if Martha Stewart is on par with the Intel corporation, but she is worth half a billion dollars, so I digress.
- jjeaff 9y agoBy "higher profile", I just mean as far as the general public is concerned. I've worked in tech my whole life and I couldn't have told you who the CEO of Intel is. But everyone knows Martha Stewart. It's a Good Thing®
- dingo_bat 9y agoInsider trading is one of the few things that can still put rich people in jail, though.
- Aaargh20318 9y agoProbably because of it’s potential for harming other rich people.
- deleted 9y ago[deleted]
- m3kw9 9y agoUnless is a planned sale from a long back, then he could be ok
- matt4077 9y agoBrian Krzanich earns around $20 million p.a. at Intel. He sold 900,000 shares for about as much, total. Even if he expected the stock price to be cut in half, he'd save just half a year's worth of his regular compensation. And Intel stock barely budged. That would be an enormously stupid attempt at insider trading. Not only doesn't it pay very well. A CEO of such a company is closely watched by stockholder, the company's own lawyers, the media, competitors, and the SEC. The SEC regularly nails mid-level executives of unknown companies giving tips to their friends' dentists.
- knowaveragejoe 9y agoWhy is this downvoted? This seems like a reasonable debunking of the insider trading theory, unless someone has better information than this.
- JumpCrisscross 9y ago> This seems like a reasonable debunking of the insider trading theory Martha Stewart went to jail for avoiding $45,000 in losses [1]. People don't always act rationally. More pointedly, you don't have to act in bad faith to break securities law. The lack of any disclosure surrounding this material issue, which Intel knew about for months prior to the CEO's sale and prior to Intel's Q3 Form 10-Q, is jarring and could result in liability. [1] https://en.wikipedia.org/wiki/ImClone_stock_trading_case https://en.wikipedia.org/wiki/ImClone_stock_trading_case
- knowaveragejoe 9y agoWhat does that have to do with insider trading, though? I'm reading elsewhere in this thread that this was a scheduled sale ahead of time. Supposing it was indeed pre-planned well before they knew of the vulnerability, cancelling the sale would also be insider trading.
- jjeaff 9y agoThe scheduled sale was for less than 100k shares. He modified the schedule to 900k shared after finding out about meltdown.
- convery 9y agoDoesn't the board have to approve all such sales months ahead? Just seems strange that people are acting as if he sold all he had and ran for the hills when the bad news were released.
- QAPereo 9y agoIIRC from https://news.ycombinator.com/item?id=16067322 https://news.ycombinator.com/item?id=16067322 this was a scheduled sale, so it was already approved.
- jjeaff 9y agoImportant quite from the above linked article: "Intel says the sale was preplanned - but that plan was put in place months after it learned of the chip vulnerability"
- T2_t2 9y agoBut it is (somewhat) consistent with his previous sales: http://www.nasdaq.com/quotes/insiders/krzanich-brian-m-872413 http://www.nasdaq.com/quotes/insiders/krzanich-brian-m-87241... I dunno how to read this, but it seems he sold off a chunk of his shares regularly, and that he traded almost a million down to 250K, but how did he have so many? Can someone who knows how to read that explain it to me?
- latch 9y agoSetting aside what the law currently is, why is it illegal? This WaPo article [1] always seemed spot on to me. For most of us, individual stocks are a David and Goliath thing, and there should be no illusion of equality. [1] https://www.washingtonpost.com/news/wonk/wp/2013/07/26/insider-trading-makes-us-richer-better-informed-and-could-prevent-corporate-scandals-legalize-it/ https://www.washingtonpost.com/news/wonk/wp/2013/07/26/insid...
- ikeboy 9y agoBecause he has a fiduciary duty to the shareholders, and by selling his shares he is misappropriating company information for personal benefit.
- dsacco 9y ago> Because he has a fiduciary duty to the shareholders, and by selling his shares he is misappropriating company information for personal benefit. This was a scheduled sale. It's not clear to me what the SEC is seeking to investigate. Breaking a scheduled sale to take a loss is also illegal insider trading.
- wmf 9y agoHe scheduled it after he knew about Meltdown.
- bduerst 9y agoSo is your point that insider trading isn't bad, or that this isn't insider trading? Because the WaPo article linked to is about insider trading.
- dsacco 9y agoMy point is that it's not insider trading. I also didn't link to any Washington Post article in my comment, so it's not clear to me if you responded to the right comment here.
- omarforgotpwd 9y agoWell, most every CPU was affected not just Intel’s. If I were Intel’s CEO my primary motivation for selling would be NVIDIA and ARM, not this exploit.
- chx 9y agoWell, Meltdown is (almost) Intel only.
- deleted 9y ago[deleted]
- msbarnett 9y agoNot by Meltdown, and the Meltdown specific patches are by far the most performance killing
- dna_polymerase 9y agoIt doesn't matter if other architectures are vulnearble as well. It looks like that the Intel CEO acted (sold stock) upon information which by its nature should have been made available to all stockholders prior to this. The whole matter is reported here [0]. It really looks shady from the outside. [0]: http://www.businessinsider.de/intel-ceo-krzanich-sold-shares-after-company-was-informed-of-chip-flaw-2018-1?r=US&IR=T http://www.businessinsider.de/intel-ceo-krzanich-sold-shares...
- omarforgotpwd 9y agoIt is fairly normal to sell a portion or all of shares received from excercising stock options to cover tax liabilities. I don’t think it’s clear that knowledge of the exploit changed his behavior. Furthermore the stock has not taken a major hit on the news. It is still up compared to a month ago, 3 months ago etc. it is down a little over the last week. The idea that he sold to avoid a stock crash doesn’t really hold if the stock didn’t crash, right?
- uncle_d 9y agoHe sold all but the bare minimum he is required to hold as CEO. Whatever else, the optics are terrible. But he must have known they would be, so it's a little hard to see what his thinking was here. And it's early days on the stock price - let's see where it is in 3-6 months.
- matte_black 9y agoA proper examination is best so that he can clear his name once and for all.
- j1vms 9y agoAnyone know whether there will be any repercussions for continuing to keep the flawed chips on the market, and for that matter continuing to sell these as of today. I'm not talking about recalls of purchased product, just that Intel chose to continue to keep chips with major known issues on store shelves instead of choosing some other option.
- wmf 9y agoIntel did release a microcode update (which "couldn't" be released early due to "responsible disclosure"). Taking all their processors off the shelves would be suicide.
- cabaalis 9y agoCan someone explain the disclosure procedures that were actually followed? It seems like everybody freaked out at the same time. AWS had apparently already protected all but a "small percentage" of their VMs. If there was some kind of responsible disclosure taking place, allowing vendors time to upgrade, it seems like it wouldn't have had so much impact.
- mousa 9y agoI think the disclosure procedures were abandoned because people outside of the loop had figured it out from Linux kernel upgrades.
- JumpCrisscross 9y agoFirst Equifax, now Intel. Let's assume no bad faith. That means committees and control functions are failing to (a) appreciate the damage a security vulnerability (or exploit) can cause and/or (b) receive timely notice of said occurrences. We might need a new disclosure rule. Prompt disclosure whenever a material security vulnerability or hack is discovered.
- mehrdadn 9y ago> Let's assume no bad faith. Sounds good. Let's also assume data-driven decision-making. > failing to (a) appreciate the damage a security vulnerability (or exploit) can cause As far as I'm aware, neither of these is known to have resulted in damage yet, so as far as I'm know there is nothing to fail to appreciate. > failing to (b) receive timely notice of said occurrences This is a problem if and only if the above damages actually do occur more quickly than the people in charge have time to act. So it loops back to the above. _______________________________________ EDIT: It seems everyone is misunderstanding my point. I'm not looking at this from the standpoint of either of the parties. Yes, they can sue for damages, and perhaps they even should. That's perfectly fine! That has nothing to do with what I was trying to say. Rather, I'm looking at the problem from an 'outer' standpoint -- the same perspective I would assume a lawmaker would have (or at least should have), which is the perspective of: "Is the system able to handle its problems?" If the legal system can already handle this "exception" and sort out the problems and hand out appropriate penalties for everyone involved, then the system is working as designed, i.e. we fail to have grounds for e.g. requiring early disclosure. On the other hand, if people who are not parties to the case are getting hacked and/or having their identities stolen, then that is a failure of the legal system that needs to be addressed, e.g. by requiring timely disclosure. Basically, the fact is that we all like timely disclosure (myself included) and yet we are failing to explicitly show what problem exactly it would solve. So far, it is not clear that earlier disclosure would have prevented any problems that we are already seeing. If and when we get solid data to that effect, then we have grounds for blaming lawmakers and demanding change.
- chrsstrm 9y ago> As far as I'm aware, neither of these is known to have resulted in damage yet Damage as in malicious? No. Damage as in co's reporting higher instance usage on cloud services after patching? Yes. Don't discount companies being angry about higher hosting costs and taking it out on Intel via a financial damages suit.
- alain94040 9y agoThe facts: In 2017, he set up pre-arranged sales of 28,000 shares And then in November he sold almost 900,000 shares. on Nov. 29, Krzanich exercised and sold 644,135 options and sold an additional 245,743 shares that he already owned
- ww520 9y agoThat's pretty damning. It looks like they set up a pre-arranged schedule to sell but the amount to sell is determined at a convenient time.
- turc1656 9y agoIt's actually worse than that. He completed the prearranged sale of 28,000 shares that he had declared for 2017 in October. Then he sold an additional ~845k shares in November!
- yes_or_gnome 9y agoIt seems pretty simple when you look at the filing. Just quietly change the rules whenever you see fit. > Explanation of Responses: > 1. Transactions reported on this Form 4 were made pursuant to trading instructions adopted by the reporting person on October 30, 2017 that are intended to comply with Rule 10b5-1(c). https://www.sec.gov/Archives/edgar/data/50863/000112760217033679/xslF345X03/form4.xml https://www.sec.gov/Archives/edgar/data/50863/00011276021703... https://en.m.wikipedia.org/wiki/SEC_Rule_10b5-1 https://en.m.wikipedia.org/wiki/SEC_Rule_10b5-1
- jpdaigle 9y agoWhere's the line for material non-public information, vs something not obvious to most of the public, but discoverable through research? Any engineer sufficiently motivated to do so could have examined a CPU at any time in the last ten years, and, through skill, access to publicly available information (the instruction set, cpu datasheets) and immense amounts of hard work, uncovered the Meltdown flaw, without any access to Intel's internal trade secrets.
- kornish 9y agoAll insider information is non-public, but not all non-public information is insider.
- rvern 9y agoLaws against insider trading should be abolished. The statutory prohibitions cause real economic harm by making markets less efficient, while there isn't actually anything immoral about insider trading. It's not fraud, it's a victimless crime, and markets getting non-public information faster is good because it allows faster correction of the allocation of capital to companies that are worth more or less than is publicly known. People who have knowledge of the deficiencies of a company should have an incentive to make the public aware of them and correct the price at the same time, and a trade does just that.
- conanbatt 9y agoI generally agree with Friedman that insider trading is not as bad as it is portrayed for some of the reasons you mention. But there is also another side of the coin, particularly with CEO's: he had the command to disclose there was a high impact security issue, and chose not to and profited from it. In this case, he was participant in creating the trade. As such, he sold stock to people that didnt know about a piece of information he was withholding. So im not so convinced there shouldnt be any insider trader laws.
- rvern 9y agoHe did not profit from it at their expense, though. The people he sold stock to were already going to buy stock at the same or worse price, just from someone else. There may be a good case to be made that he should have been required to disclose that there was an important vulnerability, but insider trading laws don't solve this problem or make the people he sold to better off. The people he is profiting at the expense of are not the investors who buy the stocks he sells or the investors who would have otherwise sold to the former investors, but the investors who would, many months later, once the vulnerability was public, sell or short the Intel stock. There isn't really any reason these people should profit from the information rather than anyone else, and the CEO isn't interacting with them in any way.
- conanbatt 9y ago> He did not profit from it at their expense, though. The people he sold stock to were already going to buy stock at the same or worse price, just from someone else That's not really true, it is so in an individually imperceptible way but its there. If he then after stock plummeted 10% went back and bought back shares and kept the 10% as a profit, where did that money come from? It has to come from someone elses pocket, it was created out of thin air. Its just impossible to return that money to who it belongs to, because it belongs to everyone that traded the stock in a certain interim. This is all related to information disclosure, which sometimes is necessary and sometimes isn't. A guy selling stock is a poor proxy to a disclosure of a security issue like this. I think intel is more responsible for untimely disclosure than the CEO for untimely selling.
- flylib 9y agogood this was reckless
- krisives 9y agoMost companies would recall a product if it was unsafe, just to avoid the potential liability. However, the problem is that almost no guarantees are made in any way when you buy a product from Intel and any guarantees you think they made are immediately absolved of liability by legalese you "accepted" when you opened the packaging, etc. Also, technically, their caches / tables still work as designed we just didn't understand that design very well.
- ryanpcmcquen 9y agoYeah! Just like Equifax really got nailed ... wait.
- droopybuns 9y agoThe number of security events that have significantly affected stock values is very limited. Only equifax comes to mind. If I recall correctly, Weev tried to short AT&T in advance of the iPad hack, but only got a tiny intra-day dip. The stock that week ended higher every day. It is risky to short based on security mistakes. I am willing to give this guy the benefit of the doubt. I wish the financial markets valued security more. There just isn’t a lot of evidence to support that hypothesis.
- pmorici 9y agoHow many security mistakes have translated into anything more than a minor one time cost to the company involved? I can't think of any.
- droopybuns 9y agoI would argue that part of the decline of HTC has been Because of their FTC penalties. Look at the last year of equifax’s stock price. One major dip related to one major news story. Their are a few anecdotes, but most of the time, there is no major financial impact.
- KKKKkkkk1 9y agoAs we now know, insiders have been selling Intel shares long before the vulnerabilities became public. The impact is already baked into the price, whatever it was. So we'll never know whether Krzanich made money at the expense of his shareholders, but I can't imagine he thought no one will ask themselves that question.
- qwerty456127 9y ago> As we now know, insiders have been selling Intel stock long before the vulnerabilities became public. I understand this is just not legal, but otherwise why should they had not (i.e. why exactly is it illegal)? What the rationally logical plan they should have taken? Telling everyone about the vulnerability is irrational - it should be told to those who are supposed to write patches first, keeping the shares when you know they are going down is irrational too.
- bwilliams18 9y agoInsider Trading is illegal. That’s what he’s being accused of here. He cannot trade on information that is material to the stock price before it is made public. A vulnerability of this magnitude is unquestionable material non-public information. If these trades were the result of his learning about the breach, this is a pretty easy case for the SEC. I really doubt that he executed these trades, as that would be the dumbest thing an executive has done in a while.
- gh02t 9y agoIt's not an argument of rationality, it's about fairness to the larger market and how easily insiders can abuse access to information. The price of a stock is supposed to reflect its value, if you act on insider information and sell at the apparent price when it would actually be lower if everybody had access to the same information then it's fraud. Those are the rules you agree to and you have to abide by them, even if it appears irrational. I agree actually that patch writers should have been notified first with specifics, but he should have held on to the stock (if he indeed did sell it based on insider info as accused). Edit: to say it differently, it's only irrational if you consider his personal profit exclusively and not the harm to the greater market and shareholders. As con artists and scammers demonstrate, fraud can be very profitable personally. I think the disadvantages are self-evident, however.
- Kyragem 9y agoThe 1% owns this country and can get away with murder while Joe Schmoe is left holding the bag.
- mbesto 9y agoGood analysis as always from Matt Levine: I am always skeptical that stories like this are actually about insider trading, just because it would be too dumb and obvious for Krzanich to dump his stock just before announcing bad news. Also: The news doesn't seem to have been that bad for Intel's stock, and in fact Krzanich's sales last year were mostly at prices below yesterday's close. As a diabolical plan it seems pretty unimpressive. https://www.bloomberg.com/view/articles/2018-01-05/citi-forgot-to-fix-its-money-laundering-systems https://www.bloomberg.com/view/articles/2018-01-05/citi-forg...
- saguro 9y ago> The news doesn't seem to have been that bad for Intel's stock That's a red herring. Krzanich had no idea how badly the news would impact the stock. He may have well overestimated it in his mind and chose to sell. Just because he didn't make huge gains from the possible insider trading, doesn't preclude the possibility of insider trading occurring. So the whole argument here is: 1) Krzanich couldn't be possibly stupid enough to do this. 2) He didn't make a ton of money so it's a stupid plan, he could't possibly be stupid enough to do this. Weak.
- katastic 9y ago"Intel CEO stupid enough to not know how stocks work, but smart enough to keep 20 year secret vulnerability that would destroy stocks." Yeah... those don't exactly work out together.
- baddox 9y agoCan’t you attribute criminal intent to any action if you’re willing to assume limitless ignorance?
- rando444 9y agoShould all criminals be able get away with crimes by claiming unbelievable levels of ignorance?
- bitL 9y agoMassive server slowdown requires more hardware to be used; AMD can't supply many servers, so it's a big win for Intel sales as they will sell many more servers than anticipated. IMO Krzanich is going to lose a lot on premature stock sales.
- dkaigorodov 9y agoEasy, easy; the guy just decided to buy some crypto-coins)
- jlgaddis 9y agoI'm more curious if any of his family or close friends (who hold significant amounts of $INTC) sold during the "pre-public" period.
- qubex 9y agoThe argument that his sales might’ve violated insider trading rules is puerile, populist, and patently absurd. The whole point of having pre-arranged stock sale plans is precisely this: so that execution of them does not leak any information whatsoever into the market. Think about it: if he had a pre-arranged plan and didn’t sell because he feared running afoul of insider trading rules ahead of a drop, it would have alerted other investors to the fact that something that spooked him was going on, and they would have preempted the unknown risk and rushed for the exit, crashing the stock. In short, his is precisely why CEOs insist on these pre-arranged plans to make their stock grants and stock options valuable without causing them to incur the damoclean sword of being ’allowed’ to monetise only when they have absolute certainty that none of the no doubt innumerable problems they are aware of and paid to manage will leave negative impacts on stock valuations (meaning: never, making their stock worthless). There’s nothing to see here.
- xxs 9y agoHe did sell like 32 times more than the "pre-arranged" plan.
- qubex 9y agoAs I understand it, because he had more than he had ever had before, and had just received the biggest payout ever. So again, yes... but probably not unjustified.
- brewdad 9y agoAlso, after a couple of years of trading in a range in the low to mid-30s, in September the stock began a surge up to $47+. That's a pretty good time to sell off a large chunk of stock regardless or whether he knew anything about this defect (he knew).
- turc1656 9y ago"People who are CEOs of companies like Intel don’t make mistakes like this." Right. That's because this isn't a mistake, it's a criminal act with forethought. "That sale decreased his overall holdings by about 50 percent, bringing his ownership level nearer to what he held at the end of 2013 and at the minimum number of shares he must hold under Intel’s ownership requirements" That's pretty much all I need to read. The guy sold every share he could possibly sell without violating any contractual agreements and company policies that are/were in place. Give him an orange jumpsuit and be done with it.