Sorrell Used WPP Stock as Collateral for Personal Loans
There’s been discussion recently about whether WPP can pay its debts. (BNET concluded that, for the time being, WPP is fine). But what about WPP boss Martin Sorrell’s personal debts?
Turns out Sorrell is highly leveraged — with his own stock. The FT and the Independent report that Sorrell was one of many UK execs who was recently required by the Financial Standards Authority to disclose that they had used their holdings of their own company’s stock as collateral on personal loans they took out.
The issue became controversial in the UK because of:
the resignation from several posts of David Ross, the co-founder of Carphone Warehouse, after he admitted he used his holding in the business to guarantee personal loans on commercial property without telling colleagues. When widespread confusion about the rules subsequently emerged, the FSA decreed an amnesty on such undeclared loans and gave companies until yesterday to reveal the transactions.
Sir Martin pledged a total of 7.9 million shares, currently worth around £31m and representing almost half of his total holding of 1.3 per cent of WPP, against various loans taken out between 2005 and November last year.
Between 2005 and November last year, WPP stock fell from a high of 701 pence to 401 pence. Which means that Sorrell is somewhat less able to pay his debts, in terms of paper collateral, than he was when he took out the loans.
Sorrell released about 260,000 shares in December in a charity donation; his spokesperson says he has sold very few shares of the company’s stock in his time at the company.
Jim Edwards, a former managing editor of Adweek, has covered drug marketing at Brandweek for four years, and is a former Knight-Bagehot fellow at Columbia University's business and journalism schools. Follow him on Twitter or send him an email.
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