‘Something’s Up’ With US Economy Due to High-Profile Stock Sales?

In early March 2024, fear of a potential U.S. financial and economic downturn spread among some internet users after they came across rumors alleging that several business tycoons recently sold billions of dollars in their own companies’ stocks.

“The Walton family just sold 4.5 billion of Walmart stock,” the viral message read. “And, Jeff Bazo [sic] sold $8.5 billion today, Jamie Dimon sold $150m of JP Morgan, Zuck sold $400m, Buffett is selling ALOT! Something’s up mate!”

The message’s assertions were true — those moguls indeed sold notable amounts of stocks in their own companies in late 2023 and early 2024 — though the implication that those moves signaled a potential economic slump lacked crucial context. Also misleading was the notion that the sales’ amounts were unusual (for example, Bezos sold $10 billion in Amazon stock in 2020 and $8.8 billon in 2021, Reuters reported in 2021), though market analysts consider the fact that so many high-profile business leaders sold within such a short time frame to be significant.

It’s True: Billionaires are Cashing Out

With general accuracy, the viral message referred to these financial decisions:

• Amazon Founder Jeff Bezos sold $8.5 billion in Amazon stock over nine days in February 2024.
• On Feb. 22, 2024, Jamie Dimon cashed out JP Morgan stock by about $150 million in shares. This was the first time he cashed out of the bank’s stock in his 18 years at its helm.
• Meta Platforms Founder and CEO Mark Zuckerberg dumped $428 million in Meta stock at the end of 2023. (The viral message alleged a lower amount, $400 million.)

Furthermore, the message correctly included the Walton family, the founders of Walmart, in the trend. However, in reality, that group’s sale was lower than the purported amount of $4.5 billion. The Walton family sold $1.5 billion in Walmart stock between Feb. 21, 2024, and Feb. 23, 2024, bringing its total stock sale proceeds to $2.3 billion since December 2023, according to filings at the Securities and Exchange Commission (SEC).

The viral message’s claim that Berkshire Hathaway Chairman Warren Buffett also sold “a lot” was rooted in truth, too. Buffett reportedly sold 1% of his Apple stock holdings at the end of 2023, an amount that represented about $2 billion.

Other high-profile business leaders cashed out in late 2023 and early 2024, as well. For instance, Leon Black, a co-founder of Apollo Global Management, sold $172.8 million in Apollo stock the week of Feb. 19, 2024, marking the first time selling the private equity firm’s stock since he founded it in 1990.

Looking individually at the sales, the amounts were not too unusual. For example, between November 2020 and July 2021, Zuckerberg sold Meta shares nearly every day the stock exchange was open — equity worth about $2.8 billion, Forbes reported in 2021. Meanwhile, Bezos made $3.3 billion in Amazon stock sales the first week of November 2021, according to Bloomberg News. Total, in 2021, he sold about $8.8 billion.

In sum, the in-question heirs, founders and CEOs sold a combined $11.5 billion in shares of their own companies between the last quarter of 2023 and January and February 2024. (We did not include Buffet in that total because his sale of shares involved a company that is not his.) And these sales happened as the in-question stocks traded near all-time highs. 

Are the Sales Cause for Concern?

A popular version of the message was posted on March 5, 2024, and garnered 5,400 reactions and 14,000 shares, as of this writing. Of that post’s thousands of comments, one read, “Yup! Stock up. It’s going to get very bad!” Another one said, “We are about to see a financial crisis. A lot of company stocks are up today.” 

Statements by some financial market players suggested validity to those fears. 

For instance, American Hartford Gold, a company that sells gold and other precious metals to retail investors, put an ominous spin on the above-mentioned cash-outs by U.S. tech and finance leaders. Betting on the fact that some investors see precious metals as safe-haven assets, Senior Director Mechi Block suggested in a promotional video on the company’s website the massive equity sales may indicate an economic downturn. He encouraged prospective clients to contact the company to buy gold as a way to hedge financial risk tied to stock markets. Gold was trading near record highs as of March 8, 2024.

That said, according to several market analysts, the high-profile selloffs do not necessarily presage a financial and economic slump for several reasons.

First, these stock sales were scheduled months ago, per SEC rules, contradicting all suggestions of conspiracy. Like other investors, leaders of publicly traded companies are not allowed to trade on internal information. By scheduling transactions ahead of time, executives are able to ward off suspicion of insider trading. Referencing these various stock sales, Fortune reported on Feb. 27, 2024:

Many of the sales were made according to 10b5-1 trading plans that the executives set up late last year and early this year. These trading plans are created in advance so that shares are automatically sold by a broker at a specific date or when the stock hits a certain price. They’re set up to be triggered at a time when the executive doesn’t possess material non-public information that could potentially move the stock price and gives the executive a defense against potential insider trading charges by regulators.

Insiders typically sell stock as prices are rising. By selling just before a slump, they may be scrutinized by financial authorities like the SEC and even be subjected to investigations into their trades.

Also, business leaders have a variety of motivations when they’re selling stocks. In other words, they sell, on a regular basis, for reasons other than the possibility of a looming financial crisis. For instance, they may sell to prevent or pay off large tax bills, for estate planning or to diversify their investments. 

It’s unknown why, exactly, the magnates sold their stock this time around, but there are theories as to why their sales are happening within the same time frame.

For example, when it comes to the “Magnificent Seven” stocks (Google’s parent company Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla), the decision to sell may be due to a desire to make up for a long period of inactivity on the stock market. According to Jonathan Levin of Bloomberg News:

Among the closely watched Magnificent Seven growth stocks, net sales by insiders are at their highest since late 2021. But many insiders stopped selling entirely from mid-2022 through late 2023, and it’s natural to expect some catch-up to address executives’ desire for liquidity and portfolio diversification.

For example, Bezos did not sell any Amazon stock in 2022 or 2023, Investor’s Business Daily wrote on Feb. 21, 2024.

February 2024 marked the first time for both JP Morgan’s Dimon and Apollo’s Black selling a portion of their shares in their own companies, respectively. Because of that, several social media users expressed worry current conditions were unique. The implication was that the finance magnates were preparing themselves for stock prices to plunge.

To market experts, however, the timing of Dimon’s and Black’s sales made sense. Axios explained on Feb. 25, 2024: 

When companies are growing fast or still establishing themselves, the stock market tends to frown on substantial share sales from CEOs — it’s seen as a sign of a lack of faith in the stock.

Now that these companies are firmly established as some of the most valuable corporations on the planet, however, Wall Street cares less about such personal signals. After all, at some point, every family will need to diversify its wealth.

Let us note here: While the dollar amounts of the sales by Bezos, Zuckerberg, Dimon or Black were huge, they only represented a small part of the executives’ holdings, Business Insider said on Feb. 26, 2024.

Notably, neither Bezos nor Zuckerberg have spent the proceeds from the trades, indicating they may have confidence in the future performance of their companies, says Austrian news outlet Trending Topics. “New shares have not yet been purchased for portfolio diversification, which could indicate that the money is being reinvested in their own companies,” the outlet reported on March 6, 2024.

Sources