Insider Ownership Analysis of our Companies

Investment Analysis Clubs Saul’s Investing Discussions
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I have learned so much from Saul and everyone here (I lurked most of last year), and thanks to Saul and you guys my portfolio is kicking the S&P 500’s butt this year (I’m up roughly 16% now YTD). I want to give back to you guys when possible, so I constructed a quick insider analysis of many of the board’s popular stocks.

I haven’t done insider analysis before, so please feel free to point out any errors I may have made. I wouldn’t be surprised if I got at least something somewhat wrong. I generally used EDGAR’s data as most recently per company as I could find. For those of you unaware, “Def Form 14a” can be found on edgar for most companies, which is where insider ownership is disclosed. Some filed 14a forms this year, some I could not find and so had to resort to other forms (10k, prospectuses, etc) or sources, and others I had to go to last year’s data, so definitely some of this data may be stale. However, it is somewhat rare when insiders sell large amounts of stock, so probably what I am giving you, even if older, is still relevant. The caveat, though, is that if some insider did sell a bunch of stock, we would really want to know about that!

TLDR – Pretty much of all of our favorite SAAS stock are heavily insider owned companies, with the exception of COUPA. The high level estimate of insider ownership (all directors and officers combined) for our SAAS companies looks like this: DDOG (28%) ROKU (27%), ZM (16%), TTD(15%), OKTA (13.9%), CRWD( 13.75%) LVGO( 13%), AYX (12%), COUP (3.4%)

Does this mean COUPA is bad? Definitely not, and they do have at least some skin in the game, although not very much. Insiders get forced to sell (or choose to sell) for all kinds of reasons, that we can’t necessarily guess at.

More company specific details are below. In general, if percent stakes were not directly on the form in EDGAR, I would sum shares owned per person(regardless of class A or B) and divide by shares outstanding. Please let me know if that is not the right way to do this.

ROKU – shares outstanding 91m
founder/ceo Anthony wood – 23mm class b shares. 25% of shares outstanding. This number, like the others, is from edgar, but it seemed really high to me, so I double checked, and this number is close enough/basically in line with wikipedia:
https://en.wikipedia.org/wiki/Anthony_Wood_(businessman)

All execs combined – 25 mm class b shares, 312k class a shares. 27% of shares outstanding
https://www.sec.gov/Archives/edgar/data/1639225/000119312520…

DDOG
This EDGAR info is older (a prospectus from the IPO I think?), but it’s the best I could find,
Olivier Pomel – 39mm shares or 14.5%
Aleixs Le Quoc – 25mm shares or 9.2%
Fun side note: Dev Ittycheria (CEO of mongodb) owns 1.8mm shares, not quite a 1% stake.
All directors/officers as a whole control 28% of the stock.
https://www.sec.gov/Archives/edgar/data/1561550/000119312519…

Also to note, insiders have been selling DDOG, per https://www.gurufocus.com/stock/DDOG/summary
Nothing substantial that I found, but generally they are selling small amounts. So whatever ownership is listed above, know that it is probably a little less by now.

LVGO – Glen Tullman (founder and executive chairman) owns 4.3mm shares, 7wire Ventures (a vc company that he manages owns 5.5mm shares. 4.3mm shares is a 4.3% stake, 5.5mm shares is a 5.8% stake.
Christopher Bischoff – Senior investment director owns 6.6 mm shares, or 5.8% stake
All execs/directors as a group own 13.2mm shares, or 13% stake.
https://www.sec.gov/Archives/edgar/data/1639225/000119312520…

Zoom – Founder/CEO Eric Yuan holds 16.5%
279 MM shares outstanding
https://www.sec.gov/ix?doc=/Archives/edgar/data/1585521/0001…

TTD –
39mm shares outstanding
Jeff green (CEO) owns 196k shares, 6.1mm class b voting shares. 15% stake
https://www.sec.gov/Archives/edgar/data/1671933/000156459019…

AYX - 66mm shares outstanding Dean Stoecker –8mm class b, 174k class a. comes out to 43% of voting power. Dean has a 12% stake.
https://www.sec.gov/Archives/edgar/data/1689923/000168992320…

all execs as group: 8.3mm class b, 575k class a

CRWD –Couldn’t find a “Def 14a” form, and the usual sources did not reveal insider ownership, but per the latest 10k George Kurtz (president/ceo), owns 5.5 mm class b common stock
Per yahoo finance, there are 40mm shares outstanding, so George has a 13.75% stake.
https://www.sec.gov/ix?doc=/Archives/edgar/data/1535527/0001…

Okta – as of May 2019
CEO/cofounder Todd Mckinnon – 6.9% stake
COO J Frederic Kerrest – 3.2%
All directors and exec officers as a group: 13.9%
https://www.sec.gov/Archives/edgar/data/1660134/000119312519…

COUPA – 64.8 mm shares outstanding
CEO Rob Bernshteyn – per 14a, he owns 1.5mm shares or 2.3%
All executive officers and directors as a group (9 persons) own 3.4%
https://www.sec.gov/Archives/edgar/data/1385867/000119312520…

**Full disclosure I am long all of the above companies.

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“Also to note, insiders have been selling DDOG, per https://www.gurufocus.com/stock/DDOG/summary
Nothing substantial that I found, but generally they are selling small amounts. So whatever ownership is listed above, know that it is probably a little less by now.”

Great post for a newbie like me, thank you!

Question: If I am reading this right, regarding DDOG, their CEO has sold over $25M worth of shares since 24 Jan, isn’t that concerning on some level?

Thanks in advance!

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Looking at The Motley Fool’s newsletter recommendations, founder-led companies have returned 195%, compared with 95% for our non-founder-led picks — and 61% for the S&P 500.

Excellent point, HMC. I will also explicitly say that all but one of the companies I did insider analysis on are founder led. Specifically:

AYX, ZM, TTD, LVGO, ROKU, DDOG, ZM, CRWD, OKTA are all founder led.

Only COUP is not founder led. It was founded in 2006 by Noah Eisner and Dave Stephens, both of these guys per their linkedin profiles seem to have very much moved on. COUPA is a very different company now even than it was a few years ago (see broadwaydan’s post of all of COUPA’s acquisitions https://discussion.fool.com/coupa39s-15-acquisitions-34468678.as…), so it probably makes sense to have different management now.

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Question: If I am reading this right, regarding DDOG, their CEO has sold over $25M worth of shares since 24 Jan, isn’t that concerning on some level?

So the CEO (Olivier Pomel) owns 14.5% of DDOG by my estimates. Its market cap is currently $11.5 billion. 14.5% of 11.5 billion is approximately $1.6 billion dollars. Selling 25 million out of a 1.6 billion stake is basically peanuts :slight_smile: He probably just wanted to buy a yacht or something lol.

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Hey Vinegar,

Context is important, thanks for providing me some more of it!

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“Question: If I am reading this right, regarding DDOG, their CEO has sold over $25M worth of shares since 24 Jan, isn’t that concerning on some level?”

Also worth noting is that these founders are like us; they have portfolios to manage, families to consider and generational wealth considerations.

Often if you look deeper into the sale, it will tell a very understandable story. I know that at times when I have made the same inquiry, others have pointed out to me that perhaps there is some portfolio management considerations going on or sometimes what may look like a sale is actually a transfer to trust accounts.

I am sure there are others on this board that could provide other circumstances that are plausible explanations.

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“Often if you look deeper into the sale, it will tell a very understandable story.”

Is there a way to do this? Do they have to report the reasons behind the sale or something?

Sorry, might be a dumb question but still have a lot to learn, thanks.

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Is there a way to do this? Do they have to report the reasons behind the sale or something?

I don’t think they give a reason. They only have to report acquisitions and sales. Acquistion information like how acquired (options come due, open market purchase, etc. Sales information, was it a day after options matured? What percentage does CEO Joe still own? Did Joe sell out completely? That’s an issue. Did Joe sell 20,000 shares out of a million he has?

You can extract some knowledge by looking at how much stock the buyer/seller still owns. Also, some sales are scheduled in advance as part of a family trust plan or something. Boss Sally gets 100,000 options a year, sells 50,000 annually to fund a family trust or something. If she has been doing that for years, then stops selling that might reflect knowledge of a reason she wants to hold onto the shares this time.

Also, you can learn a lot from open market purchases. They are more significant than open market sales, because they are putting new money in at a price the person closest to the action thinks is a good deal. MGM hotels is a recent example. Execs bought millions of dollars of their own stock at $10-12 a share when it crashed over the virus. SFIX has some, Carnival Cruise too. In a case like that, you see that the folks closest to the action put their own money in.

You can find insider tracking websites with a search engine and see who is buying and selling.

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Is there a way to do this? Do they have to report the reasons behind the sale or something?

Again, a message board member with financial statement review skills greater than mine (doesn’t take much) may have a better explanation.

However, based on various articles I have read and podcasts I have listened to, it is apparent that the information is out there. On a recent TMF podcast, I believe Bill Mann or another TMF analyst address this question regarding Katrina Lake and SFIX.

In this particular instance, I think I recall that she transferred shares to her children’s trust accounts.

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Is there a way to do this? Do they have to report the reasons behind the sale or something?

It’s best to go to the source, to the SEC filings. Share transactions are Form 4. They have a lot of information but the seller does not disclose the reason for buying or selling.

Link to NASDAQ SEF filings: https://www.nasdaq.com/market-activity/stocks/beat/sec-filin…

Form 4: https://secfilings.nasdaq.com/filingFrameset.asp?FilingID=13…

Denny Schlesinger

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I like openinsider.org. It automatically parses the SEC forms. You can easily see whether it was an option expiration (Sale+OE) or an open sale.

I ignore anything with an +OE. I think sales are pretty much useless too. the only thing I really look for is open buying. The notable buys/sells I’ve observed in the last few weeks include:

AAXN (insider purchase)
FSLY (several purchases by Abdiel, who has also been buying APPN)
SMAR (big insider sale by one of the venture capital guys that funded them)

The only reason I noted SMAR is because it was a particularly large sale. I’ve also noticed a ton of selling activity in names like ZM, DOCU, EVBG that have been benefiting from COVID. Like someone said above, these people are normal people with families, philanthropic goals, islands to buy, etc. I do not have the time to go digging, but if you look into it I think you will find that there is no statistical benefit to tracking insider selling, especially in fast growing tech companies, but insider buying does have a correlation with positive stock performance going forward. I’m sure there is a ton of nuance to it. I just like to check in every now and then to see who is buying, and lately with all the panic I was particularly curious so I’ve been checking pretty often.

I also like seeing companies that I own that have zero sales other than routine OE. Examples include ROKU, OKTA, PAYC. I’m sure there are others. There has always been a ton of insider selling at AYX and TTD, doesn’t stop me from being my 1st and 4th largest positions.

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I believe you mean:

openinsider.com

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