Alzheimer's Club

"Elan directors and officers made sales worth $43.5 million, mostly in the period January to February 2001, when the shares were trading close to their all-time high. Now shares in the troubled pharmaceutical company are languishing at $2.

This follows a 95 per cent plunge from the all-time high due to a combination of factors including an investigation by the US Securities and Exchange Commission into the company's accounts and disappointing results for some of the pharmaceutical products on which investors had pinned their hopes.

Former chairman Donal Geaney, who resigned recently, sold 160,000 shares on February 28 2001 for $8.6 million, indicating a price of $53.75 -- close to the share's all-time high. Director John Groome sold $12.85 million worth on February 8. Brendan Boushel scooped up $8 million and Lisabeth Murphy, described as an officer, picked up $6.24 million for her shares.

A spokesman for the company, PJ Mara, said that, "it was then seen as just taking a bit of money off the table". Most of them still have most of their shares, while Mara still has some options, he added sadly.

Director share sales are closely monitored by investors, as they are often interpreted as a sign that the directors believe the shares have reached a peak, though the reality is that directors may sell for a variety of reasons, including meeting a personal financial need such as buying a house. And while hindsight may be 20/20 vision, a number of share sales by Irish directors seem to have been well timed, as the bull market of the 1990s turned to a bear market in 2000.

Several Sherry FitzGerald directors made modest purchases in the estate agency in April, at around 95c. This was after major share sales a year earlier at a much higher price. Then, Sherry director James Meagher sold 100,000 shares to realise €170,000, while Gerry Murphy sold 59,895 shares for €101,821. They, plus unnamed members of the management, placed a total of 941,203 shares at €1.70. Sherry FitzGerald said that it was to satisfy demand from an institutional investor and to improve liquidity. Soon afterwards Sherry was hit by the property slowdown.

Sherry's shares are now at €1, having been as high as €2.40 at one time. Cavan construction materials group Kingspan is another company that has hit choppy water. Director Dermot Mulvihill sold 100,000 shares at €4.24 on July 3 2001. The shares were at €1.95 at the time of writing. James Paul sold 109,000 at an average of about €3.90 around the same time. Russell Shiels unloaded 100,000 at €4.30 in the same period. But the directors have also bought recently. Eoin McCarthy acquired 958,335 shares at €1.14 on June 14. Russell Shiels has also made a small purchase recently.

Mulvihill says that he sold the shares to pay for a house he was building. He understands that Shiels was also buying a house in the United States. And Paul's sale was simply portfolio diversification. In April 2001 IAWS finance director David Martin raised €570,000 after exercising options over shares in the agribusiness company. Around the same time, chief executive Philip Lynch made a profit of €1.7 million on 300,000 options. He got the shares for €2.90 each and immediately sold them into the market at €7.40 each. His latest sale was last March 25 at €9.175 -- he exercised options and sold at a profit of €707,500. The shares have since fallen to €8.20. Last October Lynch made of a profit of €1.63 million in a similar transaction.

Around March, Martin sold at a price of €9.30, the year's high. His profit was €457,500. An IAWS source considers that Lynch and Martin have to face the institutions regularly and would not be selling on the belief that the shares would go down. "They no doubt expected them to go up," he said.

The Kerry Group's all-time high was €15.81. Former chief executive Denis Brosnan sold almost half of his holding in the agribusiness company on March 12 this year at €15.42. The shares now stand at €13.55. After the sale of the 308,000 shares Brosnan still held 360,000. Kerry says that Brosnan, as a result of assuming the role of chairman, exercised options last year using borrowings and held the shares until a `dealing window' allowed him to sell.

"It has all to do with his becoming chairman," a spokesperson said.

Michael O'Leary of Ryanair is still selling. On June 13 he and the Ryan family unloaded €47 million worth of shares. This represented 14 million shares at a price of €6.70 per share. The shares are now at €6.05, but have been lower since the sale. The Ryans would not comment, but the O'Leary attitude is generally that he is simply taking some money off the table.

It is estimated that the founding Ryan family, including Tony Ryan, has unloaded shares worth more than €340 million since the company floated in 1997. Until now the shares have generally been unaffected by these sales, and have moved inexorably up.

Michael O'Leary has also been a regular seller, chalking up €175 million in total. June was the fourth time he sold. In the case of radiator to plastics group Barlo, Aidan Barlow lightened his holding from 5.86 million shares to 5.16 million in the year to end March 31 2001 at a price in excess of 80c.

The company says that this was understood to be for family reasons. The company has had a hard time in the last few years, and on July 2 Aidan Barlow picked up 344,000 shares at 23c. Another director, Brian Beausang, has also been buying shares. Barlo's shares are now 27c compared with a 12-month high of 79c.

Bookmakers Paddy Power plc, formerly Power Leisure, is a relative newcomer to the market and agreements locking in 27 per cent of the shares came to an end on July 24. This saw Peter O'Grady-Walshe selling 130,000 shares and Edward McDaid unloading 20,000.

This was not quite a flood of selling, but the sale of 420,000 from a charitable trust set up by chairman Stewart Kenny will emphasise to other shareholders that setting up such trusts allow share sales that would otherwise have been prevented by a lock-in.

All the above transactions were at €5 a share and the shares are now €5.10.

Company secretary Charlie Kelly says that, while there might be personal reasons for selling in each case, Paddy Power has been under pressure to increase liquidity in the stock. "It was lack of liquidity that drove it to €6 earlier this year, and the sales help this situation," he said. "Our stockbrokers would like more liquidity in the stock so that the price does not gyrate too much when institutions buy." Chief executive Stewart Kenny, sold one million shares in March at 455c, but he agreed to a new lock-in, to March 20 2003, for the remainder of his shares. This did not bind the trust, which received shares from him, Kelly said. O'Grady-Walshe and McDaid sold 50,000 and 20,000 respectively on March 21 at 455c..."

Source: Des Crowley. Directors who sold before the downturn. (11 August 2002) [FullText]

Also see the article on shares sale by Dennis Selkoe, science leader of Alzheimer's Vaccine Program by Elan: Des Crowley. Elan Alzheimer's expert in pre-slump share sale. (18 August 2002) [FullText]