During reporting season you may have missed the news that the Telstra Corporation Ltd (ASX: TLS) CEO sold some shares.
Telstra is Australia’s largest and oldest telecommunications business, having built the first telegraph line in 1854. Today, it provides more than 17 million retail mobile services, nearly 5 million retail fixed voice services (e.g. home phones) and 3.6 million broadband services. It also has operations stretching across eHealth, network applications and subsea cabling. Starting in 1997 (until 2006), the Australian Government sold Telstra to Australian investors via the ASX. The second batch of Government share sales, called “T2”, was conducted in 1999 at $7.40 per share.
Should Shareholders Worry About The Telstra CEO Selling Shares?
On 22 February 2019, Telstra confirmed that CEO Andy Penn sold 300,000 shares at $3.24 each, totalling $972,000. The selling price of $3.24 was close to the highest the share price had been in 2019.
Why did he sell? Telstra confirmed that Mr Penn sold the shares to fund tax payments arising from previous share allocations as part of his remuneration.
Telstra also said that Mr Penn’s holdings continue to exceed the company’s ‘Executive Share Ownership Policy’ requirements to hold Telstra shares to the value of 100% of the executive’s fixed remuneration.
After the change, Mr Penn still owns just over 1 million of ordinary shares, he owns 378,319 ordinary shares indirectly and has performance rights to over 1.2 million shares.
Does this matter?
Tax can be complicated and expensive, so if Mr Penn needed the money I can understand the sale.
However, it isn’t the best look to be selling shares when regular shareholders are suffering. But, Mr Penn seems to be doing most of what he can control at Telstra, mainly costs.
With Telstra’s profit falling by more than 27% in the recent report and the dividend being cut by a similar amount, I’m not sure it’s the best time to buy Telstra, particularly with early 5G prices seemingly similar to 4G prices. Instead, I’d rather consider one of the proven shares in the free report below.
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