Financial regulatory authorities charged a 56-year-old New Yorker with insider trading on Tuesday, alleging that the executive had foreknowledge of Foot Locker’s disappointing earnings, which would likely precipitate a stock selloff. Authorities stated that the executive made approximately $113,000 from these actions, and under a pending settlement deal, he is required to repay the amount in double.
According to the Securities and Exchange Commission (SEC), Barry Siegel engaged in short selling Foot Locker’s stock on two occasions: once while still employed as a senior director of order planning and management, and a second time following his termination during corporate layoffs. Siegel had spent two decades at Foot Locker and was aware of impending negative sales and inventory data that would be shared during earnings calls with investors.
The SEC’s complaint specifies that Siegel short-sold 8,000 shares of Foot Locker stock in May 2023, just two days before the company’s first-quarter earnings announcement. A short sale entails betting on a stock’s decline; an investor borrows shares at the current market price, anticipates a drop, then repurchases them at a lower price to secure profit. Foot Locker’s stock price did indeed drop by 27% after the earnings were disclosed on May 19. Siegel allegedly earned about $83,000 when he bought stock to cover his short position at 9:31 a.m. that same day.
Siegel’s second transaction occurred in August 2023, roughly one week after being laid off by Foot Locker. He short-sold 3,000 shares before the company’s second-quarter earnings release, which led to a 28% fall in Foot Locker’s stock price. The SEC reported that this transaction yielded Siegel $30,132.
Foot Locker, founded in 1974 and known for offering brands like Nike, Adidas, Puma, and limited-edition sneakers, has faced challenges in recent years due to reduced mall traffic. The company announced plans to close 400 stores by 2026, aiming to shift focus towards sneaker hype and experimental concept stores, moving away from traditional shopping malls.
Siegel has neither admitted nor denied the charges. He has agreed to pay back the $113,000 he gained from short selling the stock, with accrued interest, and an additional $113,000 fine. Additionally, Siegel is barred from serving as an officer or director of any public company.
An SEC spokesperson declined to provide further comments beyond the press release, and Siegel did not immediately respond to a request for comment.