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What is insider selling, and what are some causes of it?
Insider selling refers to the selling of shares of a company by upper management including directors, officers, and other insiders. Investors track activity in stocks in their portfolio and on their watchlist because:
· Inside information (such as a poor EPS report on the horizon or lousy news) can drive key employees to sell shares and avoid losses in the stock.
· Sizeable sales can give savvy investors an idea of how confident management is in the company’s future.
· An insider selling large amounts of a stock already down a lot can be telling.
Insider selling does not always point to impending doom in the underlying stock. Sometimes large inside shareholders may sell stock to free up cash for personal reasons or diversify investments. Either way, it is important for investors to monitor insider transactions. As an investor, it is better to allocate capital to a company where insiders have skin in the game and confidence in their stock.
A Stock Showing Troubling Insider Selling
Silvergate Capital (SI - Free Report) is a crypto-focused bank.
Who sold?
Image Source: Zacks Investment Research
Why is the sale concerning?
Alan Lane, President and CEO of Silvergate, sold all his shares ($856,305) worth in July and has yet to purchase any back. The company has also experienced more than $8 billion in client withdrawals after revelations came to light that Silvergate was involved in business dealings with the now defunct crypto exchange FTX and its sister company Alameda Research and is now facing a DOJ fraud investigation.
Another concerning issue is the weakness in shares and their inability to recover after the recent relief rally in crypto. For instance, Riot Blockchain (RIOT - Free Report) is up 74.70% in the past month. Crypto exchange Coinbase (COIN - Free Report) is up more than 50% at the same time. Meanwhile, shares of Silvergate are down 25% over the past month.
Image Source: Zacks Investment Research
Another concern is the rising implied volatility (IV) in the options market. A high IV suggests shares are likely to move in one direction or another drastically. While SI has many concerns, it is risky to short the stock due to its propensity to short squeeze and the uncertainty surrounding the outcome of the DOJ investigation.
Using Zacks to Track Insider Trading
Investors interested in exploring insider transactions can visit Zacks.com to find more information. Simply pull up the stock you wish to explore using the quote search and on the left-hand side of the Zacks quote page click “Insiders” under the “More Research” tab.
Image Source: Zacks Investment Research
Because insider transactions require SEC disclosures, Zacks is able to provide important information such as the employee’s position (CEO, VP, etc.), the number of shares bought/sold and transaction value, the price and date of transaction, and the total number of shares owned.
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A Stock with Troubling Insider Selling Trends
What is insider selling, and what are some causes of it?
Insider selling refers to the selling of shares of a company by upper management including directors, officers, and other insiders. Investors track activity in stocks in their portfolio and on their watchlist because:
· Inside information (such as a poor EPS report on the horizon or lousy news) can drive key employees to sell shares and avoid losses in the stock.
· Sizeable sales can give savvy investors an idea of how confident management is in the company’s future.
· An insider selling large amounts of a stock already down a lot can be telling.
Insider selling does not always point to impending doom in the underlying stock. Sometimes large inside shareholders may sell stock to free up cash for personal reasons or diversify investments. Either way, it is important for investors to monitor insider transactions. As an investor, it is better to allocate capital to a company where insiders have skin in the game and confidence in their stock.
A Stock Showing Troubling Insider Selling
Silvergate Capital (SI - Free Report) is a crypto-focused bank.
Who sold?
Image Source: Zacks Investment Research
Why is the sale concerning?
Alan Lane, President and CEO of Silvergate, sold all his shares ($856,305) worth in July and has yet to purchase any back. The company has also experienced more than $8 billion in client withdrawals after revelations came to light that Silvergate was involved in business dealings with the now defunct crypto exchange FTX and its sister company Alameda Research and is now facing a DOJ fraud investigation.
Another concerning issue is the weakness in shares and their inability to recover after the recent relief rally in crypto. For instance, Riot Blockchain (RIOT - Free Report) is up 74.70% in the past month. Crypto exchange Coinbase (COIN - Free Report) is up more than 50% at the same time. Meanwhile, shares of Silvergate are down 25% over the past month.
Image Source: Zacks Investment Research
Another concern is the rising implied volatility (IV) in the options market. A high IV suggests shares are likely to move in one direction or another drastically. While SI has many concerns, it is risky to short the stock due to its propensity to short squeeze and the uncertainty surrounding the outcome of the DOJ investigation.
Using Zacks to Track Insider Trading
Investors interested in exploring insider transactions can visit Zacks.com to find more information. Simply pull up the stock you wish to explore using the quote search and on the left-hand side of the Zacks quote page click “Insiders” under the “More Research” tab.
Image Source: Zacks Investment Research
Because insider transactions require SEC disclosures, Zacks is able to provide important information such as the employee’s position (CEO, VP, etc.), the number of shares bought/sold and transaction value, the price and date of transaction, and the total number of shares owned.