David Sokol, once considered to succeed Warren Buffett, resigned yesterday. The financial media is speculating he resigned because he bought 96,000 shares of Lubrizol (LZ) before it was acquired by Berkshire Hathaway. Some people claim that what Sokol did qualifies as illegal insider trading. Sokol maintains that he had no control over Warren Buffett’s decisions, so what he did isn’t illegal.
We don’t think David Sokol’s resignation has anything to with illegal insider trading in Lubrizol shares. Warren Buffett unusually issued a press release that clearly stated Sokol’s resignation isn’t related to insider trading. He said he knew that Sokol owned Lubrizol shares before he made the decision to buy the company. Warren Buffett also didn’t ask for Sokol’s resignation; it was Sokol’s decision. “Neither Dave nor I feel his Lubrizol purchases were in any way unlawful. He has told me that they were not a factor in his decision to resign,” Buffett said in his press release.
So, why did David Sokol resign?
Insider Monkey, your source for free insider trading data, thinks David Sokol resigned to “run off to South America with Lindsay Lohan”. Last week in India, Warren Buffett said Berkshire is prepared for anything, including Ben Bernanke resigning and running off to South America with Lindsay Lohan. Berkshire Hathaway keeps $10 Billion in cash for these types of “just in case” situations. Clearly, the opportunity cost of holding $10 Billion in cash is very high. This implies it’s likely Bernanke might run away with Lindsay Lohan. By that same logic, this also implies it’s likely David Sokol may run away with Lindsay Lohan.
It’s also possible that Warren Buffett’s earlier statements about Lindsay Lohan might have upset her and made her take the initiative to call David Sokol to “travel” to South America together. Everybody knows how much Lindsay Lohan likes alcohol and they make great batidas in Brazil. Knowing that Warren Buffett is an honest man, we believe him when he says Dave Sokol’s resignation has nothing to do with illegal insider trading. This means it is more likely that Dave Sokol resigned to run off to South America with Lindsay Lohan.