Cashing In (or Not) at the Wall Street Journal

Dow Jones & Co. remained in play this week, as the controlling Bancroft family continued to seesaw between rejecting Rupert Murodch's offer outright, seeking more information -- or trying to squeeze more money out of their suitor.

Meanwhile, some Dow Jones employees were moving to cash in on the company's new, higher stock price -- even as they remained publicly anguished over how Murdoch might corrupt the pages of the company's signature property, the Wall Street Journal, if he became its proprietor.

While some Dow-Jonesers did cash in, when the stock price jumped from $37.12 to $55 or more after Murdoch's offer was made public, there probably aren't as many Dow Jones profiteers as an outsider might suspect.

For one thing, Dow Jones has very strict conflict of interest rules -- and they prohibited anyone involved in the coverage of Murdoch's takeover attempt from either exercising their Dow Jones stock options or selling any of their Dow Jones stock. That group includes all of the editors on the masthead -- the ones most likely to have the largest number of options, or the greatest numbers of shares.

Another limiting factor -- even for those not involved in the coverage -- is the fact that Dow Jones stock options don't vest for three years. So only those options granted before 2005 could be exercised right now.

"I have some options which are not in the money," said Jim Browning, a Wall Street Journal reporter and union activist, "and if you look at the history of the stock, even at $60, it's not a huge gain."

That's because as recently as January, 2004, the stock was trading in the low 50s -- so even if employees had bought 200 shares at a 15 percent discount (which every employee is entitled to do every year) -- depending on when they made their purchases, their profits would not be gigantic.

Even those employees who bought stock every year often disposed of it quickly. "People always said, the second it comes to your mail box, you have to put on your running shoes to sell it," said John Brecher, a co-author of the Journal's wine column. "It was always good advice because the stock always went down. I've got options, but they're at $64 -- so they're still under water."

Finally, there are tax considerations. "I've got some stock here in my drawer," said veteran Journal reporter James Sterba. "The trouble is, it's last year's model" -- meaning he bought the shares through the employee plan in 2006. That means that if he sells them before July 1, 2007, his profits will be treated as ordinary income. "So if I bought it at $35 and sold it at $55 I'd pay a huge amount of tax," Sterba explained.

"I know that there are some people who have sold," one senior Journal editor told me. "But for most people, the profits wouldn't be enough to remodel a kitchen in Manhattan."

by Charles Kaiser