Two Kinds of Insider

Mark Zuckerberg, CEO of Facebook (FB) and Rich Kinder, CEO of Kinder Morgan (KMI) would appear to have little in common (though they are both billionaires). However, they share one thing in common in that both recently made transactions in their own stock.

FB has ‘A’ and ‘B’  shares, whose rights are identical other than ‘B’ shares have 10 votes each and can be converted 1:1 into ‘A’ shares. Mark Zuckerberg is exercising an option to buy 60 million B shares and then converting them into ‘A’ shares prior to selling 41.35 million in an upcoming secondary offering.  He says he’ll use most of the proceeds to pay taxes but will still wind up controlling 56.1% of the voting power (compared with 58.8% before the sale) and will have greatly reduced his tax liability since he’ll net $2.2 billion pre-tax with virtually unchanged ownership. On top of which he’s inflicting video commercials on FB users. I am (barely) still a user, but assiduously ignore any advertising.

Meanwhile, Rich Kinder recently spent $27 million buying shares in KMI, bringing his holdings to 231 million worth about $8 billion. You can invest alongside Rich Kinder, but you can’t buy the ‘B’ shares that Zuckerberg owns. Who would you rather be in business with? We own KMI.

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