Saturday, May 19, 2012

Stock | Saleh exits Gannett -- and GCI shares, too; what departing CFO's sale says of future prospects

If you were one of Gannett's most in-the-know executives, and thought the company's stock was poised to chug higher, would you keep your shares in hopes of making more money down the road?

Conventional wisdom says you would.

But perhaps GCI's outgoing chief financial officer knows something we don't.

I say that because Paul Saleh, who's leaving for another CFO job at a much larger company, sold 45,000 optioned shares this week for a relative pittance, according to a new regulatory filing to the U.S. Securities and Exchange Commission.

The shares were among 180,000 options he received in November 2010, when he joined the company as its chief finance executive. That's a position where, presumably, he knows a thing or two about GCI's prospects -- and the chances for the stock to rise from its current doldrums.

GCI closed yesterday at $12.96, falling below the $13 threshold for the first time since the company announced a big increase in the dividend meant to shore up the shares. That is well below its 52-week high of $16.26 on Feb. 22, the day Corporate said it was boosting the dividend 150%.

Option Basics 101
Options such as Saleh's are a common form of executive compensation. They allow the recipient to buy shares from the company for a set price -- known as the "strike price" -- no matter how much they're worth in the broader market. Typically, the recipient buys them cheap, then sells them high on the market.

In Saleh's case, the strike price on his options was $12.67 a share. He could exercise his options in four equal installments starting this past Dec. 10.

Yesterday and Thursday, the new regulatory filing shows, Saleh sold those 45,000 optioned shares for $595,000 -- an average $13.22 a share. He paid $570,000 for them, so he only netted $25,000.

Which brings me back to my original question: Why not exercise and then hold those shares, assuming you thought GCI's stock will rise higher?

Certainly, Saleh's option agreement requires he exercise them while he's still an employee; tomorrow is his last day. He's joining Computer Sciences Corp. on Wednesday.

But I've found nothing saying Saleh had to sell his shares once exercised.

To be sure, other insiders have been bullish on GCI's stock. Three members of the board of directors boosted their holdings in March and February, albeit at prices higher than where GCI's trading now.

Also, Corporate's strategy of cutting expenses further, while investing more in digital initiatives like the USA Sports Media Group, may turn the company around and send shares higher once more. Patient stockholders could be richly rewarded.

A postscript
Saleh, 55, is walking away from his 135,000 remaining options, since he won't be a GCI employee when they hit their exercise dates over the next three years.

He's also relinquishing 65,000 restricted shares he couldn't claim until December 2014. At current prices, those would be worth about $842,000.

But in joining CSC, he struck an even richer deal.

Earlier: On way out, Saridakis sells thousands of shares at $18.63 each.

Where do you think GCI's stock is heading -- and why? Please post your replies in the comments section, below. To e-mail confidentially, write jimhopkins[at]gmail[dot-com]; see Tipsters Anonymous Policy in the rail, upper right.


  1. By the numbers, the CFO was with Gannett a year and a half, saw greener pastures elsewhere and cashed in while his stock was still worth something. Message to Gannett employees, as with senior management, you should be looking for a job! I doubt Saleh was just contacted last week which suggests he became interested in other opportunities possibly in the first year he was employed by Gannett. I suspect he preferred to see Gannett in the rearview mirror.

    Congratulations Mr. Saleh!

  2. You act like a potential decision to "exercise and hold" his GCI shares would be an easy thing to do, like "I think I'll press the exercise and hold button, then go get coffee." Here's the rub: in order to do what you hint he might have done, he would have had to pony up $600K in CASH. You get the option to buy, not the cash to do it with. So the vast majority of option holders buy and sell in the same transaction - it's the only way to cover the expense side easily. I'm sure if he was in the mood to invest $600K in stock, and had the bucks to do it, he'd do it in his new company; he's already made the decision to leave, so he wouldn't be looking back. I suppose he also could have retained the $25K in GCI stock, but the same thought applies: why hold stock in the company you've already decided to leave? That might signal to the new company that he has mixed loyalties (and the "Jim" from the new company would be roasting him). None of that means he thinks the company's stock is a great buy of course. But I just don't think that came into question here. He had to exercise, and "holding" was simply not a realistic choice, even for a "rich" guy. So where does that leave me on this post? Did you know this already, and gloss over a $600,000 detail in order to try to make the company look bad again? (Conspiracy theory, one to match yours.) Or were you, the former (current?) biz reporter both uninformed and not diligent enough to even do a Google search on the subject?

  3. Can't wait to hear jim's response on this one.

  4. 9:22 You raise an excellent point about Saleh tying up $600,000 in cash over a relatively tiny discount to the market price -- in this case, just 4.3%.

    Better to do what he did: Take the $25,000 profit.

    But maybe yours is the better question: "Why hold stock in the company you've already decided to leave?"

    The answer is: You shouldn't -- if the only reason you held it in the first place was to create the appearance you believed in the company.

  5. Those minuscule options gains are going to be even tinier once they are taxed by the Feds. The next high falutin corporate savior who comes in would be smart to ask for more restricted shares with few strings and a big wad of cash upfront.

    Then again, with Martore's financial background, do we really need a CFO?

  6. 10:35 Starting this year, the board of directors dumped stock options entirely in favor of a type of restricted stock the company is calling performance shares.

    Newly hired USA Today Publisher Larry Kramer got 37,341 restricted shares that he can claim all at once on Dec. 31, 2015.

  7. Saheh would have gotten about 1200 shares after taxes. Don't think he'd believe or not believe in the company by keeping

  8. Jim, it sounds like you either missed the point, or you are still clinging to a conspiracy theory.

    It sounds to me like the other poster spelled out very clearly why the decision was made. Not sure what you aren't getting or why.

  9. In the last decade or so, Chief Financial Officers and Chief Marketing Officers have a 12-18 month shelf life before they move on.

    Mr. Saleh appears to have taken quick note of how dysfunctional the Big G is and didn't want to spend another day there. Life is short, the stock will never be worth much more than it is (or will get worse), so he moved on with his life. A good lesson.

  10. Why post a question with no answer? What was the response when you put the question to him?

  11. The switch was made because so many options are under water and will never approach their strike price again.

  12. Perhaps CSC requires executives above a certain level to divest of any stock or stock options of former employers or corporations that could be viewed as potential conflict of interest.

    A CFO would certainly have the potential to put oneself in a position where financial actions the company takes could benefit his personal holdings. Do some companies require high level executives maintain personal holdings other than stock in their own company in blind trusts like are required of some government employees?

  13. At last! A great thread! Fact is, Gannett stock value doesn't quite match the opinion with the corporate gobbledygook.

    I invested heavily in GCI stock, myself considering it an obligation to invest in my employer's future while so many of my colleagues refused -- that employer being at the time much more an actual news organization instead of an also-ran marketing company run by people way over their heads.

  14. Jim,
    Saridakis dumoed all his available shares at the high prior to leaving in April 2010 against the will of Dubow and Martore.

    Seems like everyone dumps their shares when they leave this DUMP!

  15. Keep the in the shares. It's all book keeping at this point. Bottom line - he is leaving the company after less than 2 years. All you need to know about his faith in Gannett.

  16. 10:04 is right on the mark. The bottom-line takeaway from Saleh's departure -- is Saleh's departure. He was in a position to stuff money in his pockets as is the fine tradition of GCI brass. But he saw the good times coming to an end and bailed. If the transformation miracle was going to happen, Saleh most certainly would have stuck around for the big payday.


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