Somehow I think it all comes back simply to what is in Sheldon's best interests is what he will do, period. So it either comes down to him needing some cash, or minimizing his tax footprint.
I think the government has figured out that letting options go into an RRSP untaxed is ok as long as they tax the difference (gain) in the year of exercise. In this case there appear to be some tax implications to the options where this may apply (see below from an article titled "RRSP NOT for Dummies"), and by exercising at what he believes to be a bottom, he can minimize the tax. This is only a valid assumption if he exercises the options soon. (Maybe he is hoping his sale will generate another sell off so he can exercise them at closer to 75 cents, but he couldn't possibly be that devious, could he?)
At any rate, of all insiders, his sales would mean the least to me in terms of predicting the direction of the company, because his self interests are the least aligned with the rest of the insiders. My guess is that if Sheldon was concerned, we would see him dump it all.
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Employee stock options There are no immediate tax consequences when employee stock options are transferred to your RRSP. And you'll get a contribution receipt for the fair market value of the options transferred. When the RRSP exercises the options, you must then include in your income an employment benefit equal to the difference between the fair market value of the shares on the day the options are exercised and the exercise price.
Assuming the options qualify, and most do, you can claim a 50% deduction on your tax return. The net effect is that the employment benefit is taxed at the same rate as a capital gain.
The big tax problem with this strategy occurs when the shares acquired upon option inside the RRSP are eventually sold and the proceeds paid out to you. The entire proceeds will be taxable to you as an RRSP (or RRIF) withdrawal, despite the fact that the stock-option employment benefit has been previously taxed in your hands. This clearly results in double taxation.
As a result, it is much better to exercise your stock options before contributing them "in kind" to your RRSP. By doing so, you can get an RRSP receipt for the fair market value of the shares contributed and there will be no double taxation when the shares are ultimately sold by the RRSP and the proceeds paid out in retirement.
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