Tech execs sell shares before capital gains tax hike; stock surges
Canadian technology firm Constellation Software Inc. experienced a surge in insider selling in June.
This was driven by a senior executive’s sale of $102.6m worth of shares ahead of an increase in the nation’s capital-gains tax, as reported by BNN Bloomberg.
Mark Miller, chief operating officer of the Toronto-based firm, sold a combined 27,000 shares in three transactions in mid-June. These were his first sales of Constellation stock since 2019, according to data on Canada’s System for Electronic Disclosure by Insiders.
As of June 19, he had about 252,000 shares, data compiled by Bloomberg show. Other executives also sold shares, but in smaller amounts.
The business-software company’s stock has surged about 220 percent since the end of 2019, compared with a roughly 28 percent gain for the S&P/TSX Composite Index.
Constellation’s 20 percent gain this year through last week is about five times that of the nation’s equities benchmark. Constellation did not respond to multiple requests for comment.
Miller’s sales occurred just before an increase in Canada’s capital gains tax inclusion rate. As of June 25, individuals must pay income tax on two-thirds of any gains over $250,000 in a year. Previously, only half of gains were taxable. This change applies to all gains made by companies.
Finance Minister Chrystia Freeland announced the measure in her April budget, giving investors a little more than two months to sell shares at the lower rate.
The government projected the tax increase would generate $6.9bn this fiscal year, partly due to a rush of investors and businesses selling before June 25. Freeland has pledged to control the deficit, expected to be $39.8bn in 2024-25, while funding housing and social programs.
The tax increase has drawn criticism from the country’s growing tech sector. Shopify Inc. President Harley Finkelstein has been a vocal opponent of the higher levy on social media, calling it “divisive and political” in a post on X.
I truly love Canada. And I am fiercely Canadian. This country will always be my home and I try my best to always spread 🇨🇦 pride all over the world.
— Harley Finkelstein (@harleyf) June 19, 2024
But this isn’t the way to unite us and move us forward. This is divisive and political.
We’re better than this. https://t.co/j7NGAQCGet
Finkelstein has been active in Shopify’s stock since late last year. SEDI trading records show he sold more than a net 1,000 shares through public dispositions and sales in an ownership plan since the tax announcement. He held over 200,000 shares as of June 28, data compiled by Bloomberg show.
Shopify did not respond to multiple requests for comment.
The tech sector is likely to be significantly impacted by the tax changes due to its heavy reliance on share-based compensation, said Christine Poole, chief executive officer of Toronto-based GlobeInvest Capital Management Inc.
“Technology is one to point at because they have certainly done quite well and have a lot of stock options,” she said in an interview.
