8-KOther Events

Broadcom Inc. 8-K Report, Corporate Update (Jan 9, 2020)

Filed January 9, 2020For Securities:AVGO

Summary

This 8-K filing from Broadcom Inc. (AVGO) provides important details regarding CEO Hock Tan's stock transactions and compensation structure. Specifically, the report outlines Mr. Tan's adoption of a pre-arranged trading plan (10b5-1 Plan) to exercise and sell a significant number of vested stock options. These options, granted in 2013 and 2014, are set to expire in 2020 and 2021. The plan allows for the orderly sale of approximately 1.9 million shares over a 12-month period, commencing in January 2020, which is a common practice for executives managing expiring options. Furthermore, the filing clarifies the terms of Mr. Tan's 2017 performance stock unit award. This award is tied to Broadcom's total shareholder return (TSR) relative to the S&P 500 over two overlapping periods ending in June 2020 and June 2021. The potential payout, up to 756,000 shares, is contingent upon achieving specific TSR performance hurdles, with higher payouts for exceeding the 75th or 90th percentile of the S&P 500. Investors should note that these details provide insight into executive compensation alignment with company performance and potential future share dilution.

Key Highlights

  • 1CEO Hock Tan has adopted a 10b5-1 trading plan to exercise and sell approximately 1.9 million vested stock options.
  • 2These options were granted in 2013 and 2014 and are set to expire in September 2020 and January 2021.
  • 3The stock sales under the 10b5-1 plan are scheduled to occur over a 12-month period beginning in January 2020.
  • 4Mr. Tan holds a 2017 performance stock unit award with a maximum payout of 756,000 shares.
  • 5The 2017 award's payout is contingent on Broadcom's total shareholder return (TSR) relative to the S&P 500.
  • 6Specific TSR performance thresholds (75th and 90th percentile) determine the number of shares earned under the 2017 award.

Frequently Asked Questions

CEO Hock Tan is selling stock as part of a pre-arranged 10b5-1 trading plan to exercise and sell vested stock options that are set to expire. This is a common and legal method for executives to manage expiring equity awards.

Under the 10b5-1 plan, Mr. Tan is expected to sell an aggregate of approximately 1.9 million shares of Broadcom common stock.

The 2017 performance stock unit award is a form of executive compensation where Mr. Tan can earn up to 756,000 shares of company stock. Earning these shares is based on Broadcom's total shareholder return (TSR) performance compared to the S&P 500 over two specific periods, with higher payouts tied to outperforming the index at the 75th and 90th percentile levels.

The stock sales under the 10b5-1 plan will begin in January 2020 and continue over a 12-month period. The performance periods for the 2017 award end in June 2020 and June 2021, with potential payouts to follow based on performance against the S&P 500.