I found out there were literally HUNDREDS of insider sales each year, multiple hundreds, and NO insider buys. Just look back two or three years and you’ll see they were selling like mad when Amazon’s stock price was in the three hundreds. It’s now just short of a thousand. But all these senior vice presidents and other execs were selling gobs of their stock at least TWICE A MONTH, EVERY MONTH. Were they so smart?
Yes, quite possibly. Amazon was known for having terrible pay, but generous stock options, not an unusual scenario for startups. After you’ve worked long enough for those options to vest, it might be time to move out of the two bedroom bungalow you could afford when you started, and into the McMansion you now think you deserve. More to the point, it’s time to diversify.
*** side story: I worked for Westinghouse for 17 years. Part of that time I worked in a visible position in a subsidiary in Pittsburgh, where the corporate headquarters was also located. I can tell you several stories where people higher up the food chain took their salaries, deferred their bonuses into Wx stock, took their Wx stock options, and sat on everything… right up until around 1993, when the Lending arm (corporate credit division) got in trouble with a slew of bad loans on golf courses and cheesy strip malls and the entire company went upside down. Suddenly those smarties found themselves without a job, and with stock they had bought along the way from $50 to $80 which was then worth $7 a share, and with stock options that were priced at $60 that were so far underwater that they could not (and would not) ever recover. I could point you to a couple of guys who had millions of dollars in “net worth”, who are now living in a humble split level in Monroeville because they lost their jobs and their options all at once, and whose stock would have once bought them yachts and would now barely handle a kitchen remodel. ***
Diversification. It’s oftentimes quite smart indeed. It worked out well for Bill Gates, who didn’t. It maybe didn’t work out so well for the guys at Netscape who didn’t.
And if you see sales “TWICE A MONTH”, that means they are programmed sales, which the SEC allows you to do, even in quiet and sensitive periods (like just before earnings come out) because then you cannot be accused of insider trading. You mandated (and filed paperwork for) these sales a year or more ago, long before you could have known what the quarterly report was going to say. This is, for practical purposes, the only way executives with large blocs of stock can sell 1) without triggering insider trading investigations and 2) without releasing millions of shares into the market at once, in the short windows allowed for insiders, depressing the share price.
Dan