This page has been archived and commenting is disabled.
Insider Selling/Buying Ratio Moderates To Only 40.6x
Insider selling outpaced buying by "only" a factor of 41x (data from FinViz). The data was adjusted to exclude the $37 million purchased by Elevation Partners as part of the Palm follow on, as that transaction was likely premarketed and was designed to generate deal interest by the underwriter Goldman Sachs. Pro Forma for this purchase, there was $2.1 million in 24 insider buys versus $84.4 million in 139 insider sells. While sellers are still outpacing buyers by a material margin, the volume on both side of the equation is dropping dramatically (well, mostly the sellers). At some point once the selling is exhausted, a contrarian could say that the motivation to keep the market propped up could very easily disappear.
»
- 3257 reads
- Printer-friendly version
- Send to friend
- advertisements -
This is from Jim Willie's latest newsletter (goldenjackass.com):
Wall Street eventually will find itself on the hook for tens of billion$ in lawsuits, in my estimation. The legal screws are tightening fast and hard. A lawsuit began a year ago in Connecticut, where a hedge fund was located. The firm lost heavily in toxic mortgage backed securities. Union Bank of Switzerland sold the bonds, but did not disclose certain details as they misrepresented their toxic nature. Pursuit Partners is pursuing the lawsuit doggedly, after the initial confrontation fizzled from lack of evidence. The hedge fund recently won a state court decision that allows Pursuit's lawyers limited access to some of UBS internal emails. The first round of the successful fishing expedition into emails has revealed some stench-filled smoking guns. UBS employees described the $35 million in Collateralized Debt Obligations sold to Pursuit in summer 2007 as 'crap' and 'vomit' that seems clear to reflect null perceived value. This alone is a prima facie (first face to win indictment from grand jury) in a securities fraud case, as in selling garbage knowingly that was certain to result in significant if not total loss.
The bigger revelation dug up by the Pursuit lawyer team is the extent to which credit rating agency Moodys Investors Service shared information with UBS about its impending decision to lower its ratings on some of the CDOs the firm was selling. The Connecticut Superior Court Judge John Blawie took great notice of evidence that Moodys gave UBS a preliminary peak into its decision process, and UBS exploited the information to its advantage in a rush to sell toxic bonds. That exploit enabled a massive investor loss, with prior knowledge by UBS, thus the tort for damages. In ordering UBS to post a $35 million bond in advance of a trial, the judge concluded the firm executives "were in possession of material non-public information regarding imminent ratings downgrades." A smoking gun quote from an email went as follows. A UBS bank official wrote, "It sounds like Moodys is trying to figure out when to start downgrading, and how much damage they are going to cause. They are meeting with various investment banks." Rather than being called insider trading, the door is open to prove fraud through misrepresentation. Other investment banks should take extreme notice, since they also packaged and sold complex but toxic securities whose sale depended upon a stamp of approval by a major credit rating agency. These agencies probably passed on significant information to Wall Street firms as a general practice. What is proved here is collusion, a major charge made by the Hat Trick Letter for the past two years.
+1 Chumba, for sharing.
Yachts are cheaper.
Insiders sure sold at the peak. Next stop S&P 600?
I think they just ran out of shares to sell.
To understand whether the insider trading "imbalance" is really an issue, you need to answer two questions.
First, what percentage of the insider sales were made pursuant to a 10b5-1 plan?
Second, how many insiders sold shares in the last 12 months at a higher price than that which their stock is currently trading?
The first question is important because planned sales typically are made subject to limit orders, not at market price, and the plans are put in to place months in advance of the trades.
The second question is important because insider trading laws require insiders who sell high and buy low to pay the difference back to the company, even if the prior sales were made under a plan. Why would anyone make that deal?
Let's see what the insider trading sell/buy ratio looks like in 6 months. It will be more meaningful then.
thank you for posting this...i learned something...
Well tao I guess if we were talking 2 to 1 or 3 to 1 or even 5 to 1, I might see your point. But the fact that we are talking multiples of that to one seems to mitigate the point. I mean it is clear there is basically NO insider buying. That does mean something.
I'm not sure if this has ever been a great indicator of market confidence. As a company insider, I'm probably receiving stock and options/warrants as compensation and building up a lot of undiversified risk. It makes sense that I'll want to unload shares over time so that all my eggs aren't in the same basket.
This applies whether or not I view my company as healthy.
It's the virtual zero buying that is more important to factor.
p.s. But when I see Aubrey buying CHK on margin again, it's time to call it.
Over the 20 years I've been watching insider selling, the "normal" ratio for the past 6 or 7 years has been around 10 (sales) to 1 (buy) measured in total dollars. There is always more selling precisely because so much stock (options) is given to insiders as compensation.
Even 20 to 1 for short periods of time is somewhat OK. But 30 and now 40 to 1 indicates unusual selling and I've always seen it as the rats leaving the ship at these levels.
Just my opinion.
Or another point of view...once the selling is exhausted, supply decreases, and prices rise.