Since early February 2009, NVR officers and directors have sold a total of 373,360 shares, 339,059 of which were sold by founder and company chairman Dwight Schar.
Wachovia Capital Markets LLC's Carl Reichardt said Feb. 18 that the company stock's slide of 16% for the day was most like the result of pressure from Schar's trades--valued at $139 million since Feb. 2. As of press time, NVR stock was down 14.86% on Feb. 19, selling at $341.14.
Reichardt wrote: "NVR's compensation strategy has long minimized cash payments and instead used options to compensate executives. Mr. Schar's cash compensation in prior years trailed many of his peers. Over the last 2 years, Mr. Schar took no salary or cash bonus. Despite mitigating factors, when any chairman sells essentially his entire stake in a business, we view such a transaction as negative."
During the company's fiscal year and fourth quarter earnings report, it was announced that Schar would be stepping down from his role as executive officer but would remain chairman of the board, effective Feb. 4, which allowed him to exercise his stock options. This led some analysts to believe the reasons for selling have to do with related tax planning.
"As per the March 21, 2008 proxy Mr. Schar owned 242,653 shares in a deferred compensation trust," wrote Reichardt. "Upon change of his employment status, these shares became taxable income of approximately $98 million to him."
He continued: "While tax planning and a lack of recent cash compensation help explain Mr. Schar's sales, we believe [management] continues to be bearish on broader economic prospects as well as continued excess home builder capacity we have noted frequently."
CEO Paul Saville sold 10,301 shares, and four other officers sold a combined total of 22,500 shares--all at an average of $410 per share.
Eric Landry, associate director for industrial sector research and home builders at Morningstar, said that retirement is the most likely explanation as to why Schar sold shares, but he questions why he would sell at this time: "It's odd to me. NVR is in such good shape compared to others. I would think he would figure out a better time to do so."