Jefferies Group (NYSE: JEF) could have spared itself (and its shareholders) a lot of pain if it had better handled the news CEO Richard Handler’s stock sale. The news, reported as a result of a regulatory filing, sent shares of the investment bank tumbling more than 11% on Thursday. They recovered somewhat today, but investors remain shaken over the sale and the clumsy way it was handled.
That’s a shame, because Jefferies did the hard part right. Usually, the CEO is tight-lipped about the reasons for selling stock, or offers simply a bland “tax planning” reason. But in this case, Handler was refreshingly candid, distributing a brief memo to all employees in which he gave details about the sale and reiterated his strong commitment to the firm:
“As you know, I have never sold any Jefferies stock, except for donations to charity. I recently had a number of old stock grants vest, which required significant tax payments in cash. I have been either restricted or locked up from selling any shares to generate cash to pay for these tax obligations for quite a while. Today, I sold 2 million of my approximately 14 million shares / RSU’s in order to pay off debt I took on in the past to pay these taxes. Leucadia, our largest stockholder, bought these 2 million shares directly from me at $12.58 per share. I think they made a great buy and am gratified by their belief in and support of Jefferies. While I am not happy about reducing my interest in our firm from 14 million shares / RSU’s to 12 million, being out of debt is the prudent thing for me and my family in a turbulent world. I am sharing this personally with all of you so you are aware of the exact details , and so that rumors or noise do not distort the facts. Back to business as usual and let’s keep building Jefferies.
But all that good work was undermined by a failure to release a public statement before the open of trading, so the news would be available to the market and investors would have time to assess its impact. That’s unfortunate, since it could have muted some of the damage that’s been done to the firm’s market cap – and its reputation.