Yesterday, Activision Blizzard adopted a plan under which CEO Bobby Kotick and co-chairman Brian Kelley can sell shares of their company's stock under pre-arranged terms over the next 12 months -- a move that, examined close, seems to give clues to the execs' hopes for the company.
Kotick's plan lets him sell up to 6.74 million shares -- 30 percent of his holdings -- while Kelly's plan lets him sell 10.63 million shares, or 40 percent of his holdings. Kotick and Kelley adopted their plans on September 10th and September 9th, respectively.
Wedbush Morgan analyst Michael Pachter says the share prices at the time the execs adopted their plans -- $17.39 on September 10th and $16.62 on September 9th -- plus the fact the plans suggest that sales of the execs' shares are pre-arranged, means the execs are expecting to profit from shares that appreciate.
"It is inconceivable to us that either of them adopted a plan that permits sales at prices below the closing price as of the date of adoption," Pachter notes.
The analyst says the adoption of the plans is "quite positive" news for Activision Blizzard shareholders. "By adopting such a plan, they have demonstrated a desire to address investor concerns about their confidence in Activision's future performance," says Pachter.
The analyst believes Activision can be expected to "thrive" over the holiday season, in which
Wrath of the Lich King, Guitar Hero World Tour and Call of Duty: World at War "will stand out from the pack, and will be among the top five selling titles over the next three months."
Pachter also says it's unlikely to see
World of Warcraft subscribers defect in large numbers during the slowing economy.
"It appears to us that both gentlemen fully believed that Activision stock would appreciate in the future, and we find it noteworthy that these plans were adopted prior to the recent precipitous decline in Activision's share price," he says.
"We think that the adoption of a 10b5-1 plan shows that management is willing to make a bet (along with shareholders) that Activision stock will appreciate over the next 12 months, and we view the adoption as a positive signal. We also note that the adoption eliminates the overhang of a sudden sale by Messrs. Kotick and Kelly, something that has been weighing on Activision shares since July."
