Selling shares to fund Dan Gilbert’s $500M pledge not unusual, nonprofit leaders say
The move this week by Dan Gilbert and his Rock Holdings Inc. to sell shares in Rocket Companies Inc. to raise $500 million to support Detroit neighborhoods is a common practice in philanthropy, experts say.
“It’s not unique,” said Kyle Caldwell, president and CEO of the Council of Michigan Foundations. “Some of our more storied foundations across the country and even in our backyard in Michigan have been developed through the selling of stock.”
When Charles Stewart Mott died in 1973, Caldwell noted, he was a large holder of General Motors stock. The sale of stock helped fund an endowment for the C.S. Mott Foundation, one of Michigan's leading foundations that participated in the "grand bargain" to speed Detroit's exit from Chapter 9 bankruptcy.
Modern examples of such philanthropic funding include Warren Buffet, chairman and CEO of Berkshire Hathaway, and Mark Zuckerberg, Facebook CEO. Both, he said, have donated stock to fund philanthropic efforts.
“What I would say is interesting is to think about in Mr. Gilbert’s case, this is a company operating in downtown Detroit,” Caldwell said. “He is literally making a difference with the footprint and employment of his business and now he’s taking the stock proceeds and rolling it back into that same community. I think that’s a pretty innovative approach.”
Through the Gilbert Family and Rocket Community foundations, Gilbert and his wife, Jennifer, last week issued a 10-year pledge to fund neighborhood revitalization in Detroit. Their first initiative: to create a $15 million fund to pay unpaid property taxes for 20,000 low-income residents this year.
On Monday, the Gilberts and Rock Holdings sold 20.2 million shares of Rocket Companies' class A common stock at $24.75 a share, according to Securities and Exchange Commission filings posted late Wednesday. The stock closed Thursday at 22.55 a share.
A comment in the filing said that Gilbert, the largest investor in Rock Holdings Inc., “plans to use his portion of the proceeds to help fund his recently announced $500 million commitment to revitalizing Detroit neighborhoods.” The filing also notes that Rock Holdings continues to maintain a 93% interest in the Issuer.
Aaron Emerson, spokesman for Rock Central, offered no comment Thursday beyond referring to the SEC filing comment. The company is in a quarter-end quiet period.
Teri Behrens, executive director of the Dorothy A. Johnson Center for Philanthropy at Grand Valley State University, said typically when stocks are involved in a charitable effort, it's through the donation of stocks to a nonprofit.
Foundations that are set up or receive cash donations usually do so during a liquidity event, such as when an owner sells a business or dies, Behrens said: "That's more often the scenario when it's cash donation, a contribution of cash. The original owner or their heirs have cashed out a business."
As for Gilbert's initiative, Behrens said: "I always welcome seeing people who have made their wealth in a city give back to it."