Research note


Doro: Insider selling due to tax effects from the incentive program

There has been a lot of negative headlines lately related to insider transactions from Doro's management. However, these are due to tax effects from the incentive program.

In the past we have often ciritized the lack of holdings of the Doro insiders but this time we acutally feel that the negative headlines in the news are not only unfair but in fact also misguiding. First off, The CFO, the Chief of R&D and the VP of Operations have all used 25 percent of their 65 000 stock options to acquire shares for a price of SEK 42, i.e. in total SEK 682 500 per person. As one should not expect everyone to keep millions in their bank accounts we believe these are decent purchases. The capital gains from the rest of the stock options that were sold (75 %) also amount to SEK 682 500. The Chief of sales and marketing made a similar maneuver of SEK 441 000 (as he held a bit fewer options than the other ones). However, Management has not cashed out. One have to remember that a massive tax effect occurs when the stock options are sold or exercised. The tax is individueal due to e.g. the salary and other factors but we assume the tax in this case should be at least 50 percent. The total tax and the capital gain are also depending on when the insider joined the incentive program. A later entry means lower capital gain and tax given the share performance.

The only yellow flag is the board member Jonas Mårtensson who sold half of his position. As Mårtensson is not a part of Management and therefore did not have any stock options this transaction must be related to something else. However, we note that Mårtensson has sold shares in IAR Systems, where he also is a board member, as well. We would of course have preferred if Mårtensson had sold shares in e.g. DistIT (another of his board positions) instead of Doro. All in all though, the insider transactions together, where Management increases their holdings significantly, are a positive sign. In our opinion the stock market have misunderstood the insider transaction news. We reiterate our base case of SEK 86 per share and notice the share is trading close to our reasonably pessimistic bear case of SEK 50.

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