InterDigital Inc (IDCC)

[Desert dweller]

Howard will probably sell most/all of these newly acquired shares as he has done recently. These options were about to expire and he needed to exercise them or forfeit them. He has done this just recently and shortly thereafter he sold them. In effect, each of his recent sales have given us some warning prior to selling since this seems to be his method of selling, not like most of the others who exercised and sold almost immediately. So my guess is that within 2 weeks we will see another F4 filed that shows he sold all these newly acquired shares.

As I have stated before, I believe from a tax and financial planning perspective, selling these shares now is a stupid thing. Unless he really thinks the stock will be down significantly one year from now, he would save tens of thousands in taxes ($36,000 to be exact) by holding these shares for 1 year. Since he already has a large amount of ordinary income, there would not be any AMT tax owed on the exercise of these options and the exercise date starts the clock ticking for long term capital gain treatment which is taxed at only 15% compared to 35% for ordinary income taxes.

Considering the ordinary income tax that would be owed on an exercise and sale of 15,000 shares with an exercise price of about $6 would be $63,000 (15,000 X ($18-6) X 35%) and the capital gains taxes 1 year from today would only be $27,000 ((15,000 X (18-6)X 15%), I would recommend to Howard (and everyone else in management with options) that he hold the shares and sell 1 year from now. I actually think the capital gains tax would be higher because I think a year from now the stock price will be much higher which would result in more tax dollars on the sale, but all things being equal, Howard would save about $36,000 in Federal taxes by holding these newly acquired shares for 1 year. It would also show some faith in the company which management has not been willing to show lately.

His risk of loss is negligible when you consider he only paid $6 for an $18 stock today. What is the likelihood this will go down below his strike price? I would love it if management read this post and actually followed it. It would increase the share price if management would just start to acquire shares and hold them, even if their just exercising their options, it would show some faith and belief on their part.