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Insider Weekends: Insider Selling Tops $4 Billion Third Week In A Row

  • March 14, 2021

Welcome to edition 559 of Insider Weekends. Insider buying decreased significantly last week with insiders purchasing $64.69 million of stock purchased compared to $231.56 million in the week prior. Selling decreased with insiders selling $4.4 billion of stock last week compared to $4.65 billion in the week prior.

In over ten years of tracking insider data, instances where insiders have sold more than $4 billion of stock in a single week have been rare. We did see this happen in November 2013 and May 2017 but we have never seen selling exceed the $4 billion level for three weeks in a row. When the gaming and social media platform Roblox (RBLX) went public last week through a direct listing, insiders chose to sell $391 million worth of stock in the IPO. Several members of the Roblox management team sold shares including a $84 million sale by the CEO and a $77.4 million sale by the CFO. Insiders that were buying hand over fist last March have changed their tune and are selling heavily now.

This is happening at a time when we saw 250 SPAC IPOs filed since the start of this year and compares with just 11 SPAC IPOs during the same in Q1 2020. We also saw Bitcoin eclipse $60,000 this weekend. I am by no means a perma-bear and am net long the market but have reduced my exposure in recent weeks. This latest stimulus fueled leg of the market provides a good opportunity to adjust risk and make the changes needed before the exit becomes crowded.

Sell/Buy Ratio: The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by total insider purchases that week. The adjusted ratio for last week went up to 68.04. In other words, insiders sold more than 68 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at an unusually high 20.09.

Note: As mentioned in the first post in this series, certain industries have their preferred metrics such as same store sales for retailers, funds from operations (FFO) for REITs and revenue per available room (RevPAR) for hotels that provide a better basis for comparison than simple valuation metrics. However metrics like Price/Earnings, Price/Sales and Enterprise Value/EBITDA included below should provide a good starting point for analyzing the majority of stocks.

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