Chalk it up to coincidence.
The day Apple’s CEO intervened in the market by sending a note to NBC’s Jim Cramer was the same day 280,000 of his Apple shares were scheduled to vest.
Depending on how those shares were valued they could, in theory, have been affected by Apple’s closing price—to the tune of some $14 million.
As it turns out, the method by which Apple values shares made that mathematically impossible. An earlier version of this story, posted before that method was made public, implied that Cook might have personally saved himself millions of dollars. That turned out to be wrong.
Here’s the background.
In August 2011, when Tim Cook was tapped to replace the ailing Steve Jobs, Apple’s board of directors awarded him 1 million restricted stock units (RSUs), half to vest in five years, the rest in 10. At the time they were awarded, the shares were worth $323 million.
At Cook’s request, the terms under which those shares are distributed were changed two years later; the shares now vest on a yearly basis, according to a complicated formula that includes an incentive tied to the company’s performance.
- Cook gets 100% of the shares vesting in a given year only if Apple’s total shareholder return (TSR) over the previous two years is better than 2/3 of the S&P 500.
- If Apple’s TSR beats only 1/3 of the S&P 500, Cook gets 50%.
- If Apple’s TSR is in the bottom 1/3, he gets nothing.
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So far, Apple has landed in the top 1/3 every time.
On Monday Apple fell as low as $92 a share before rebounding—thanks in part to Cook’s intervention—to close at $103.12.
Were Cook’s 280,000 RSUs ever at risk?
On Tuesday, that was a matter of some dispute. Sources close to Apple said the stock would have had to close below $0 on Monday for Apple to fall out of the top bracket.
Daniel Tello, the independent analyst who spotted the issue (see below), thought it was a close call. He put the cut-off point in the mid-to-high $80s.
To do a proper job on the math, one would have to calculate the shareholder return—including dividends—of all 500 S&P stocks and see where Apple fell.
I was inclined to give Tim Cook the benefit of the doubt. He’d earned it. Besides, he told my colleague Adam Lashinsky in March that he plans to give his fortune away.
Yet the coincidence of the vesting and the intervention was too big to ignore.
My question was this: Was Tim Cook aware when he sent that note to Cramer that 280,000 of his restricted shares were scheduled to vest that day by a formula that might, in theory, have reduced the value of his holdings by $14.4 million?
I gave Apple PR several chances to answer that one. They’ve declined.
Here’s the vesting schedule from Apple’s 2015 Proxy, p. 32:
Click to enlarge.
UPDATE: The question of whether the value of Cook’s RSUs could have been affected by Monday’s stock price rests on how that value is calculated. The proxy is silent on the method Apple uses. The common practice is to use a 30-day moving average (see Twitter thread here). According to an SEC Form 4 filed Tuesday, Apple uses a 20-day moving average.
Bottom line: Daniel Tello, who had expressed disappointment at the timing of Cook’s intervention, now concedes that it was mathematically impossible for Cook to change the value of those 280,000 shares. Whether it would have been wiser for Cook to disclose the coincidence before Tello discovered it is another question.
The headline on an earlier version of the story suggested—incorrectly—that Cook’s intervention might have increased the value of his holdings.
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Follow Philip Elmer-DeWitt on Twitter at @philiped. Read his Apple (AAPL) coverage at fortune.com/ped or subscribe via his RSS feed.
