The board of Swift Transportation has come under scrutiny for a stock buyback plan that potentially violated federal security laws.
$600 Million In Swift Transportation Stock Used As Collateral For Loans
To date, CEO Jerry Moyes, 71, has pledged $600 million in Swift stock as collateral for personal loans related to other business ventures. After Swift Transportation stock fell 54% in 2015, Moyes was faced with “margin calls”, a requirement to make up for declines in the value of collateral. Moyes apparently sometimes dealt with these margin calls by pledging more Swift stock.
The $600 million stock pledge exceeds the 10% limit of personal holdings that an officer is allowed to pledge set by the board. The board, which is unusually small at only six members, has tried to help Moyes by three times extending the deadlines for repayment.
Massive Stock Buyback Eases Pressure On Moyes
According to a report in the Wall Street Journal, Swift bought back $100 million in stock in November 2015 and January 2016. On Monday, Swift announced that a special committee created by the board had approved a stock repurchase of $150 million — a move that would retire 9% of Swift’s total stock. This announcement sent Swift stock up 22%.
The buyback would help Swift’s share price and ease pressure on Moyes, but Swift says that the current buyback plans have nothing to do with the company’s CEO. Said Swift chairman Richard Dozer: “The $100 million share repurchase plan that we, as a Board of Directors, authorized in September of 2015 had absolutely nothing to do with Mr. Moyes stock pledging, or margin calls.”
Swift Board Faces Criticism And Investigation For Stock Repurchase Plan
Investigators believe that the stock repurchase plan could include “possible breaches of fiduciary duty by the Company and/or certain of its officers and directors.”
Moyes, who built Swift Transportation from a single truck into a $4 billion per year trucking giant, faced insider trading allegations in 2005. He settled with the Securities and Exchange Commission, but never admitted any wrongdoing.