Spring came early this year for some top media executives, who took advantage of rising media stock prices in the first quarter by cashing in stock options for multimillion dollar profits.
Topping the list again this year was Discovery Communications CEO David Zaslav, who acquired about 2 million shares of Discovery stock at per-share prices ranging from $31.69 to $65.15 and sold them at $86.52 each for a profit of about $81.2 million. That was up from the $58.2 million he reaped from stock sales in the first quarter of 2013, according to securities filings.
Zaslav’s awards kick in automatically in mid-January every year. A Discovery spokesperson explained that Zaslav’s compensation agreement features only automatic payout and vesting of options each January. He does not have the option to hold or exercise options.
That can be good or bad, depending on how the stock performs at the beginning of the year. This year, Discovery shares started out strong, trading at about $89.10 on Jan. 2, then dipping later in the month to $77.96. When Zaslav’s shares were automatically sold on Jan. 16, the stock closed at $82.02 each.
Following Zaslav on the list was former Time Warner Cable chairman and CEO Glenn Britt, who reaped a $36.3 million profit from option sales in the first quarter; CBS CEO Les Moonves, who realized a $32.2 million profit from option sales in the first three months of the year, and Comcast vice chairman and chief financial officer Michael Angelakis, who saw a profit of $25.5 million from exercising options in the first quarter.
Stock options are becoming an increasingly important part of executive compensation in that they offer a way for top managers to tie a big percentage of their overall paychecks to rises in their company’s stock prices and therefore help to increase shareholder value.
Most top executives — and all of the ones on this list except Zaslav — have instituted 10b5-1 trading programs, which automatically sell shares when they get to a predetermined price. Holders of 10b5-1 automated trading programs don’t control when their stock is sold.
The unprecedented run for cable stocks in the past two years has helped option-exerciser reap ins.
Cable distributor stocks were up more than 40% in 2012 and more than 50% in 2013. Programmers have enjoyed a similar ride: Top programming stocks rose 35% in 2012 and more than 50% in 2013.
Discovery has been a top performer in the sector, rising nearly six-fold since it went public on Zaslav’s watch in 2008. It rose 42% in 2013.
Lately, though, cable stocks are beginning to show some weakness, especially after Comcast’s Feb. 13 announcement it agreed to acquire Time Warner Cable in a deal valued at about $45 billion in equity.
That news tempered some of the consolidation frenzy that has driven the stocks for the past nine months, and the sector is down about 5% so far this year.
Programmers, too, are down about 4% so far this year as regulatory proposals aimed at keeping down rising programming costs have affected the stocks.
Option sales are mostly done for tax and estate planning purposes. But some also tap into the option well to help fund philanthropic and charitable contributions.
Viacom chairman Sumner Redstone exercised options on about 1 million shares on Jan. 31 at prices ranging from $44.79 to $47.50 each, selling them for between $81.74 and $82.35 per share, for a profit of $43.9 million. Those sales were mainly to fund donations of $30 million over five years to fund a global healthcare project at George Washington University and $20 million to the Motion Picture & Television Fund’s Campaign, which supports entertainment workers and their families, Viacom said.
TAKEAWAY
Media executives did well on stock options in the first quarter, most notably, Discovery’s David Zaslav, who benefitted from a 42% rise in the stock price for 2013.
