Trailer Bridge Jumps Before Insiders Exercise Options - 7 Apr 2009

Trailer Bridge Jumps Before Insiders Exercise Options

 By Don Jeffrey

April 7 (Bloomberg) -- Trailer Bridge Inc., a freight hauler
between the U.S. and Puerto Rico, soared 55 percent on March 16,
the biggest one-day move in 12 years as a public company. Most
of the gain came in two trades in the last two minutes before
the market closed for the day.

Six executives immediately exercised options for shares
valued at $334,125, according to regulatory filings. The stock
had fallen too low to make the options valuable for almost three
weeks until the previous trading day, and the grants would
expire March 23.

“It’s not necessarily evidence of rough trading,” said
Jahan Raissi, a former senior counsel in the enforcement
division of the U.S. Securities and Exchange Commission and now
a partner at Shartsis Friese LLP in San Francisco. “It could be
just dumb happenstance.”

Two 100-share trades lifted Trailer Bridge to $3.48 from
$2.52 in Nasdaq Stock Market composite trading that day. Daily
volume averaged 6,800 shares in the three months before today,
and only 4,896 changed hands March 16, according to data
compiled by Bloomberg.

Trailer Bridge doesn’t know who was behind the last-minute
trades and didn’t disclose any news that day that might have
moved the stock, said William Gotimer, the company’s general
counsel. None of the executives who exercised the options
subsequently sold shares, he said.

“They exercised after the day in response to the rise in
the stock,” Gotimer added. “We have a policy that you can only
exercise after the close of business and prior to the opening of
the next day.”

Executive Options

Ralph Heim, the interim chief executive officer, exercised
48,000 options worth $108,000 at the $2.25 strike price on March
16, according to regulatory filings. Other executives exercising
options that day included Mark Tanner, the chief financial
officer, and Gotimer, who each got 24,000 shares worth $54,000.

The price has since dropped, reducing the potential profit
of the trade. Trailer Bridge gained 5 cents, or 2 percent, to
$2.50 on volume of 700 shares at 4:30 p.m. New York time in
Nasdaq composite trading.

Trailer Bridge, based in Jacksonville, Florida, operates
seven ocean-going barges for transporting cargo, including new
and used automobiles, between the mainland U.S., Puerto Rico and
the Dominican Republic, according to a March 31 regulatory
filing. The company reported a 2008 net loss of $3.2 million, or
27 cents a share, on sales that rose 15 percent to $133 million.

Thinly Traded

When stocks are as thinly traded as Trailer Bridge’s, it
doesn’t take much to move the price, said Eric Boughton, a
portfolio manager with Deschutes Investment Advisors in
Portland, Oregon. His partnership borrowed 2,100 shares of
Trailer Bridge and sold them, hoping to profit from a price
decline, he said.

“Many brokers are no longer making markets in some
securities,” said Boughton. “On any given day there could be a
case where a market order to buy or sell could result in a
broker who can’t find anybody to trade with at a price that’s
reasonable.”

Options give the right to buy shares at a certain amount,
known as the strike price, in a specified period. If the market
price is more than the strike price, the shares can be sold at a
profit. If not, exercising the options may produce a loss.

“If the options had expired, they’d get nothing,” said
Alexander Cwirko-Godycki, research manager for Equilar Inc., an
executive-compensation firm based in Redwood Shores, California.

Trailer Bridge, which sold for a record $14.75 a share in
October 2007, had fallen to a six-year low of $1.90 on March 5.
The shares were below the strike price of $2.25 from Feb. 25
until March 13.

Movement Before Close

The next trading day, March 16, the shares sold in a range
of $2.25 to $2.93 for most of the day. Four minutes before the
close of regular trading, the price was $2.52, according to
Bloomberg data.

At 3:58 p.m., a 100-share trade boosted the stock to $3.45.
One minute later, another 100-share trade lifted the price to
$3.48, which became the closing price for the day.

Heim exercised his options without using cash,

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