XM Files Form 4's

May 9, 2007

Tyler Savery

Insider Sales.......Every time this happens there seems to be an instant panic among investors. This is unfortunate, because often these sales have nothing to do with the sentiment about the equity, but rather Uncle Sam wanting his cut.

This is the case with 4 XM insiders today. They had shares vest, and when that happens there is a capital gain. As you should know, any time there is a capital gain, the government wants their share.

In a nutshell, and speaking in simple terms, 4 XM executives had restricted shares vest. Once those shares vest, it is a taxable event. As is the situation with many companies today, there is what is basically a paperless transaction that transpires. Enough of the vested shares are sold so as to cover the taxes due and brokerage fees associated with the transaction. The balance of the shares are held by the individual.

So, before you begin to think that insiders are "dumping shares", take a look at the filing forms. They clearly indicate if the sale was related taxes. See the example below (click to enlarge).