Jamie Dimon, the chief executive officer of JP Morgan Chase (JPM.N), will sell a portion of his shares in the largest U.S. bank next year for the first time in almost 18 years since taking over the company, the bank announced on Friday, causing more than 3% decline in the stock.
According to a filing from the bank, billionaire Dimon “continues to believe the company’s prospects are very strong” and will sell the stock for “financial diversification and tax-planning purposes.” As stated in the filing, Dimon and his family plan to sell one million of their 8.6 million shares. According to LSEG data, that represents a very small portion of the outstanding shares of JP Morgan, which has a market capitalization of more than $409 billion.
One of the most prominent individuals in corporate America, Dimon led JP Morgan through the financial crisis of 2008. This year, he played a crucial role in saving First Republic Bank, which helped calm the chaos ignited by the failure of multiple regional banks.
The sale of the company’s stock “makes perfect sense” in light of Dimon’s wealth being concentrated in its stock, according to Octavio Marenzi, CEO of Opimas, a capital markets-focused management consulting firm. Nonetheless, such actions may be seen negatively by investors.
“In his rhetoric, he has become more negative and quite bearish,” Marenzi stated. “It doesn’t look good, but they’re massaging the optics as best they can.” October saw Dimon issue a warning, saying, “This may be the most dangerous time the world has seen in decades.” Nevertheless, the bank revealed an upsurge of 35% in profits.
According to Forbes, the 67-year-old bank chief executive officer has an estimated net worth of $1.7 billion.
A company spokesman stated that the sale has nothing to do with leadership succession. The spokesman stated that, while Dimon does not currently have plans to sell more stock, he may do so in the future.
The CEO hinted in May that he might leave in three and a half years. Since Dimon stayed longer than anticipated, a number of executives who were thought to be JP Morgan’s future leaders have left to lead other businesses.
Based on Thursday’s closing price, the sale of shares would bring in almost $141 million, leaving a remaining stake of roughly $1.07 billion. Less than 10% of Dimon’s holdings will be made up of it, along with non-vested performance shares and stock appreciation rights.
Along with peers Bank of America (BAC.N), Citigroup (C.N), and Wells Fargo (WFC.N), JP Morgan’s shares fell more than 3%. “Typically, CEOs or insiders selling stock sparks concern, but not in this case, as the bank’s balance sheet remains in a strong position,” said Brian Mulberry, client portfolio manager at Zacks Investment Management, which holds JP Morgan stock. “We are not concerned on the timing or the motive behind this,” Mulberry said, adding that Zacks would not sell any shares after the announcement.
“Unless he displays opportunistic selling behavior by, among other things, targeting specific prices,” Ben Silverman, director of research at VerityData, an investment research firm that tracks insider activity, said the move was not interpreted as an expression of Dimon’s views on the stock price. Wells Fargo analyst Mike Mayo wrote in a note on Friday, “This is a reminder that the CEO is getting closer to retirement; he has 3.5 years left on his 5-year plan as CEO.”
The announcements earlier this month by James Gorman that he would be handing over the reins at Morgan Stanley and Peter Orszag becoming CEO of Lazard have brought the succession plans of Wall Street giants into the forefront. So far this year, JP Morgan shares have risen 1.4%, outperforming the S&P 500 Banks Index (.SPXBK), which has declined 18%.
Though Scott Siefers, an analyst at Piper Sandler with an “overweight” rating on the bank, noted that “it does not alter our thinking,” the news may cause some short-term weakness in the stock. Siefers stated in a note that JP Morgan has an extremely strong capital, liquidity, and risk profile.
- Published By Team Genuine Reporter