Chipotle's Vanishing Options

In 2015, Chipotle stock hit its peak price of about $758 per share, and executives owned stock options worth millions. Since then, the stock has plunged more 60 percent and executives have lost millions. For example, CEO Steve Ells lost $37.5 million worth of stock options, CFO Jack Hartung lost $34.8 million, and CMO Mark Crumpacker lost $10.7 million. In total, the four top executives at Chipotle, including former co-CEO Montgomery Moran, lost $225 million during the stock price plunge. These options were all granted before 2014 as Chipotle stopped issuing stock appreciation rights after shareholders criticized them as being too large and not linked to performance.

The Stock Market Is A Home Run

Many people are familiar with the Super Bowl indicator: If an old AFL team wins the Super Bowl, the stock market will be down for the year and if an old NFL team wins the Super Bowl, the stock market will increase during the year. A new sports-related stock market indicator is the home run/strikeout total for Major League Baseball. As total home runs and strikeouts increase, the stock market increases and as the total home run runs and strikeouts decrease, the stock market decreases. Unfortunately, the researcher who discovered this relationship argues the connection is reversed, so the change in the stock market predicts the home run/strikeout total. Guess we won’t be able to use this as a predictor of stock returns.

Debt and Taxes

A proposal to reduce the U.S. corporate tax rate from 35 percent to 20 percent also includes a provision to limit the tax deductibility of interest expense. Corporations have responded in a dramatic fashion to this proposal by repurchasing $178.5 billion worth of bonds through early October of this year. In contrast, companies repurchased only $87.3 billion of bonds for the same period last year. Of course the potential increase in interest rates could also be driving debt repurchases as companies look to lock in low coupon rates. For example, Wal-Mart issued $6 billion in new bonds to help finance an $8.5 billion repurchase. Both causes have driven debt repurchases to astounding levels.

P&G Shareholders Reject Peltz

Activist investor Nelson Peltz has apparently lost his bid for a seat on the Proctor & Gamble board. Peltz had sought to gain one seat on the 11 person board. At a market cap of $232 billion, the proxy fight was the largest in history, with the sides spending more than $100 million on mailings, phone calls, and advertisements. Peltz is expected to contend the results as the final outcome was within one percent. A major explanation for the win by P&G is believed to be the large number of individual stockholders in P&G stock.