x
Optical/IP

Riverstone: Insider Sales Programmed

More than a month before Riverstone Networks Inc. (Nasdaq: RSTN) reported that it would miss its fiscal 2002 fourth-quarter revenue targets, insiders began selling off shares (see Riverstone Savaged on Warning).

On January 11, 2002, four of Riverstone’s top executives, along with two directors in the company, sold more than $3.3 million worth of company stock, according to Thomson Financial.

Coming just a month before the company announced a sales shortfall, the stock sales don't look particularly good. But Riverstone officials say that these particular sales coincided with the company’s new insider-selling program, which began in January.

As a part of this program, four of the company's officers -- Romulus Pereira, president and CEO; Suresh Gopalakrishnan executive vice president of engineering; Robert Stanton, CFO; and John L. Kern, executive vice president, worldwide sales -- all entered the stock selling plan. Chairman of the board Piyush Patel and another board director, Eric Jaeger, also entered the program in January.

Pereira and Patel sold the most shares. Pereira sold 45,200 shares worth $915,621, according to Thomson Financial. And Patel sold 57,300 shares worth $1.6 million.

“While it looks like a large dollar amount to you and me, it’s really a modest portion of what they actually hold,” says Andrew Feldman, vice president of corporate marketing for Riverstone.

Indeed, both Pereira and Patel started out with approximately 1.5 million shares in the company, according to an S-1 filing with the Securities and Exchange Commission (SEC) in June 2001. In January, Pereira sold roughly 3 percent of his holdings, while Patel sold almost 4 percent of his. Feldman says the program allows the officers and directors to sell as much as 15 percent of their offerings over the course of the program. The shares are sold on a monthly basis, and the amount to be sold is determined when the program is begun.

While these stock selling programs are common among top executives, it is still important to note who has begun selling and how much they’ve been selling.

According to Feldman, the lockup on the company’s stock options expired in November. But insiders could only officially begin selling Riverstone stock in December 2001, since they were prohibited from selling right before or immediately after the end of the third fiscal quarter of 2001.

Still, according to Thomson Financial, Patel, Pereira, Gopalakrishnan, and Jaeger were all selling shares as early as August 2001. In fact, Patel sold $1.3 million in Riverstone shares between August and October 2001. Jaeger sold about $1.1 million worth during the same time period. These shares were initially Cabletron Systems Inc. (NYSE: CS) shares, but were converted to Riverstone stock in August when the company officially spun out of Cabletron. These shares were set to expire 90 days after the spin out, says Feldman. Pereira owned 894,463 shares of Cabletron as of March 3, 2001, according to the SEC filing. Patel owned 929,083 shares of Cabletron, Jaeger owned 23,938, and Gopalakrishnan owned 8,750.

Riverstone shares closed up today $0.27 (7.07%) to $4.09.

— Marguerite Reardon, Senior Editor, Light Reading
http://www.lightreading.com
<<   <   Page 2 / 3   >   >>
laserbrain 12/4/2012 | 10:51:16 PM
re: Riverstone: Insider Sales Programmed What are you guys, a bunch of groveling socialists?

It absolutely boggles my mind how many people sit on these boards and bitch and moan about successful entreprenuers taking a little cash off the table.

These guys built a relatively successful firm and not only have a right but indeed have a personal obligation to sell some of it. Take your million bucks, buy the home in Woodside. You've busted your ass, you deserve it.

Should you trade your company in a 401(k) in your wife's name? Duh, No. Should You pump-and-dump? of course not. Should you file with the SEC and say, "I'm selling stock every month this year, given the following conditions..."? Abso-f***in'-lutely

I frankly find those megalomaniacal execs who never sell a share of their companies just a little bit creepy.

And for those calling for 3-5 year lockouts, remember that these trades provide liquidity and liquidity is a critical factor for investors.

Obviously, as an investor you need to take this information into account. If you don't like the potential volitility of tech stocks, don't invest. As executives, they need to understand the market implications of their actions. Now that we're all clear, proceed as planned.
rjmcmahon 12/4/2012 | 10:51:14 PM
re: Riverstone: Insider Sales Programmed It absolutely boggles my mind how many people sit on these boards and bitch and moan about successful entreprenuers taking a little cash off the table.
_____________________

They weren't successful. They took much more than they needed. Their winnings didn't come from earnings.

One wonders what it takes to make great things happen. Asking only the accountants to determine our worth seems to lead to bankruptcy.
optical_man 12/4/2012 | 10:51:10 PM
re: Riverstone: Insider Sales Programmed "And for those calling for 3-5 year lockouts, remember that these trades provide liquidity and liquidity is a critical factor for investors."

Huh? The CEO is an investor? I understood that he was 'granted' millions of options that he 'sold' right before announcing an earnings warning.
How does this provide liquidity?
If I unload so many shares that my stock plummets, how does this provide liquidity?
I I unload a small number of shares that does not affect the stock price, how does THAT provide liquidity.
We're not talking the investors here, we're talking about the self involved executive staffs (at these companies) whose risk is minimal. Come on, give up 1 1/2 years of your life to possibly hit the jackpot? They still have 100k salaries, so what is their 'risk'? Honestly, what is their risk?
Layer7 12/4/2012 | 10:51:06 PM
re: Riverstone: Insider Sales Programmed Enterasys does not resell Riverstone equipment, however the basis for each product is the products that came from Yago systems. Cabletron bought them and they have now been re-spun out as Riverstone, so the basics of the product lines are the same at this point (aside from the very new product introductions).
laserbrain 12/4/2012 | 10:51:06 PM
re: Riverstone: Insider Sales Programmed More stock in public hands = liquidity. period. Liquidity has nothing to do with the price of the stock.

The CEO is of course, an investor. period. He's invested skill, sweat, time, talent and very often big $$ of his own. Your fallacy is is that because he makes a "$100k salary", is "self involved" and becuase you're worried about him making money while someone else might lose some, he shouldn't be able to sell a property that he owns.

We have to protect the little guy from the big, bad market. As long as we can buy & sell stock that could go up OR down, someone is going to get hurt. Why not outlaw private ownership of companies altogether? (Why not outlaw private property while you're at it.) It worked well for the Soviets. Umm, no...North Korea? well, nah...Cuba? hmmm, guess not... Berkeley! What about Berkeley?! There's still hope for socialism!

=-=-=-=-=-=-=-=-=-=
Huh? The CEO is an investor? I understood that he was 'granted' millions of options that he 'sold' right before announcing an earnings warning.
How does this provide liquidity?
If I unload so many shares that my stock plummets, how does this provide liquidity?
I I unload a small number of shares that does not affect the stock price, how does THAT provide liquidity.
We're not talking the investors here, we're talking about the self involved executive staffs (at these companies) whose risk is minimal. Come on, give up 1 1/2 years of your life to possibly hit the jackpot? They still have 100k salaries, so what is their 'risk'? Honestly, what is their risk?
optical_man 12/4/2012 | 10:51:05 PM
re: Riverstone: Insider Sales Programmed Author: laserbrain Number: 14
Subject: Re: Hello?! Selling is GOOD! Date: 3/4/2002 9:13:36 PM
"More stock in public hands = liquidity. period. Liquidity has nothing to do with the price of the stock.
The CEO is of course, an investor. period. He's invested skill, sweat, time, talent and very often big $$ of his own. Your fallacy is is that because he makes a "$100k salary", is "self involved" and becuase you're worried about him making money while someone else might lose some, he shouldn't be able to sell a property that he owns."

LaserBrain,
Stop staring into the red light. Are you NUTS? How can you say more stock = more liquidity? Have you never studied FINANCE? There comes a point where 'dilution' sets in. (look up that work laserbrain.
Also, name ONE CEO who is an Investor. One, please, and I'll shut up.
They are not investing any sweat.
The original objection I had was to some of these Executive Management types who use 'programmed selling' as an excuse to dump stock until the company is on it's knees.
Witness riverstone, juniper, redback, sonus, sycamore.
If these stocks had some time to mature and stablize their business then they would be able to better handle the onslaught of the Executive sell-off. (and don't try that 'well 50,000 shares is a small portion of their holdings', that only tells me that when they set up the company, they gave out WAY too many shares to people).
Don't get me wrong, I've profited HANDSOMELY from Stock Options (enough to retire and still put the kids through school). So I'm not a socialist, but I am upset with the blatant stock printing presses I'm seeing right now from a lot of these companies.
Just because you were at XXX in 1992-1996 and had as much trouble selling gear to customers as a Vodka distiller has selling his wares to the Russians populace, does NOT mean you should try the same stuff again. It's a recipe for disaster. And personally, I don't want Vendor disaster, I want across the board Vendor success.
optiplayer 12/4/2012 | 10:51:02 PM
re: Riverstone: Insider Sales Programmed Why don't we make them forfeir their first born if the stock goes down?

What a collection of envious whiners on this board. These guys had the guts and determination to start a company and are reaping the rewards of their hard work and sacrifice. Are they having a difficult quarter, yes but sales are still strong and the company is close to break even.

I guessing many of you joined start-ups that have failed and are now bitter especially when you see start-ups that have rewarded their employees.

Metadata, given that you are so much smarter than the RSTN guys and know that their product is a failure then you should be happy that their stock is in the crapper because you must have loaded up on puts or shorted the stock when it was around 20, right?

Didn't think so... much easier to Monday morning QB.

Whiners.
cruiser 12/4/2012 | 10:50:59 PM
re: Riverstone: Insider Sales Programmed bravo optiplayer. bravo. you are right. these boards are populated by naysayers and the negativism is rampant. leads me to believe that csco, nt, lu, ala, etc. have assigned people to bash startups and cheer their woes. ok, enough paranoia.

Metadata123 12/4/2012 | 10:50:56 PM
re: Riverstone: Insider Sales Programmed Optiplayer & Cruiser,

You call these guys gutsy and brave. I call them losers who cheated a collection of simpleton engineers and lied their way to Wall Street. And lined their pockets along the way. How can you defend these criminals? The only people who did any hard work were a bunch of engineers who were not part of the privileged few who bailed out in time before the stock plummeted.

Customers have given the final verdict. Except for morons who started Ethernet companies (without a defensible business case), not a single significant US RBOC have trust in their product to do broad-based adoption. These RSTN guys are looking for suckers in the Far East and if their announcements are right, have sold a few boxes to them. I feel sorry for those unsuspecting Asians.

Now all of you apologists for white collar criminals should take a good look at yourselves. We all want smart people to develop good technologies. But you donGÇÖt want hustlers to cheat the investing public and get away with it, do you? Why do you guys have a problem with calling a spade a spade?
steve 12/4/2012 | 10:50:56 PM
re: Riverstone: Insider Sales Programmed Gingerly entering this tawdry fray: We need to introduce a concept that is missing from this discussion: FLOAT. Selling is good because it puts more stock in the hands of the public, where it can be traded, hence reducing stock price volatility. This is called increasing the public float. It has abolutely no effect on "dilution" since the shares are already outstanding whether they are public or privately held. And yes if they are options that have been excercised, they are in the money and hence counted in share calculations by research analysts so revenue or earnings per share are not affected.
<<   <   Page 2 / 3   >   >>
HOME
Sign In
SEARCH
CLOSE
MORE
CLOSE