Koss family and company's execs cash in $44 million in stock during short squeeze frenzy
- Executives, directors and members of the Koss family sold more than $44 million in stock in Koss Corp. over the past week as shares soared from the retail-investor buying frenzy.
- Members of the Koss family, who own about 75% of the headphone maker, sold $31 million of stock, according to SEC filings.
- The $31 million in sales is larger than the entire market value of the company — at about $26 million — before its share surge.
Executives, directors and members of the Koss family sold more than $44 million in stock in Koss Corp. over the past week as shares soared from the retail-investor buying frenzy.
Members of the Koss family, who own about 75% of the Milwaukee-based maker of headphones, sold $31 million of stock, according to filings with the Securities and Exchange Commission.
The filings suggest they sold at prices between $19 a share and over $60 a share. The company's shares were trading under $4 a share before it became popular with the retail trading crowd and soared to over $120 a share on Jan. 28.
The $31 million in sales is larger than the entire market value of the company — at about $26 million — before its share surge. With Koss shares falling 26% Thursday afternoon, its current market cap is more than $143 million.
Within the family's sales, Michael Koss, who serves as president and CEO of the company, sold $13.3 million worth in stock, exercising options on some shares for a net of $12.9 million. That includes some $3.6 million worth of shares that were held in a trust for which Michael Koss and John Koss Jr. were co-trustees.
John Koss Jr., who is the company's vice president of sales, sold shares worth $13.7 million, netting $13.1 million, while Michael Koss Jr., who is its vice president of marketing and product, sold shares worth $3.9 million, garnering $3.7 million.
Nine insiders sold stock
Directors and other executives sold a total of $13 million in shares. When reached by CNBC, a company spokesperson declined to comment.
Nine of the company's inside shareholders sold shares. Two of them sold under 10b5-1 plans, which is a preplanned sale, and also sold shares outside their plans. The other seven sold the shares independent of a stock-sale plan, so "all nine sold at least something outside of regularly scheduled plans," according to Ben Silverman, director of research at InsiderScore.
Koss has become a favorite of retail traders looking for "short squeeze" opportunities beyond GameStop. The company's stock had short interest of over 35% before its increase, putting it on many lists of most heavily shorted stocks. By buying the shares, the traders hoped to force short sellers to cover their positions at a loss and abandon the trades.
Typically, when an investor shorts a stock, he or she borrows the shares with the belief its price will fall. Then, the investor can buy the stock at a profit.
Yet the heavy sales by insiders, and the wealth they generated, suggests that in many cases, it is the big insiders and major shareholders who profited from the trades rather than the small retail investors.
The share price increase also came at an opportune time for the insiders who wanted to sell, according to Silverman. The company reported earnings on Jan. 28 and filed its 10Q the following day, allowing the insiders to sell on Monday during their post-earnings trading window.
Lucky timing
"There's a matter of sort of luck in play here for them in that the timing of this — their earnings announcement — opened up the trading window as a normal course of business and they were able to take advantage of the volatility," Silverman said.
He said the post-earnings window also explains why they probably didn't sell when the stock was higher, above $100, on Jan. 28.
While the sales may attract the attention of the SEC, Silverman said the shareholders may have just been selling at what they felt was an exceedingly high price, which they had no control over.
"If the market wants to bid the stock price up beyond what the intrinsic value of the company is, that's the market's business," Silverman said. "These guys took advantage of it. It's not surprising."