Insider Weekends: Coinbase Insiders Continue Selling

The Coinbase (COIN) direct listing on April 14, 2021 coincided with a near-term top in Bitcoin, which hit an all time high exceeding $64,500 on the same day. There was much ink spilled about the insiders of Coinbase selling their shares but we chose not to write about it last week as insiders often sell when the company goes public. Insider buying at an IPO is however unusual, and when we spot that, we often highlight it.

The selling by Coinbase insiders was driven by the choice of the company to go public through a direct listing, a process that Venture Capitalist Bill Gurley is a big fan of after his experience with the IPO of Elastic (ESTC). We wrote about insider purchases at Elastic three weeks ago when Benchmark Capital’s Chetan Puttagunta picked up 5,000 shares for his personal portfolio.

The initial sales of Coinbase by its insiders like venture funds like Andreesen Horowitz and Union Square Ventures were related to the direct listing. In a direct listing the insiders and promoters/funds sell shares directly to the public. The latest sales highlighted below however stand out because they occurred as the stock declined after going public and one of them was by Fred Ehrsam, a cofounder of Coinbase. Whether the simultaneous decline in Bitcoin and Coinbase over the last few days marks the end of this bubble is a question best answered by crypto experts but the latest sales by Coinbase insiders certainly gives me pause when considering an investment in the company.

Welcome to edition 565 of Insider Weekends. Insider buying decreased significantly last week with insiders purchasing $29.53 million of stock purchased compared to $141.21 million in the week prior. Selling also decreased significantly to $1.68 billion compared to $3.16 billion in the week prior.

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 57.06. In other words, insiders sold more than 57 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 22.37.

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.

Notable Insider Buys:

1. The Greenbrier Companies, Inc. (GBX): $46.76

Chairman & CEO William A. Furman acquired 50,000 shares of this Oregon based railroad freight car equipment company, paying $43.85 per share for a total amount of $2.19 million. Mr. Furman increased his stake by 9.76% to 562,518 shares with this purchase.

Mr. Furman also purchased 50,000 shares in February and we wrote the following after that purchase,

Greenbrier manufactures, leases and manages railcars in North America, Europe and Brazil. The first time I came across Greenbrier was in the summer of 2011 after noticing a cluster of insider purchases by Mr. Furman and another director in the low teens. He also made an opportunistic purchase last May when he picked up 100,000 shares at an average price of $16.52 as you can see here. It is encouraging to see him “average up” at much higher prices, especially considering he was a seller at these prices back in 2017.

On the business front, Greenbrier has been a mixed bag. While the company has done a great job of reducing debt over the last ten years and using debt judiciously for acquisitions, earnings have declined in four out of the last five years. Over those five years, gross margins have declined from 22.8% in fiscal 2016 to 13.2% for fiscal 2020 ended August 2020.

GBX Revenue and Gross Margins

GBX Revenue and Gross Margins (source: GBX Q1 2021 Earnings Presentation)

Part of this is related to the decline in demand for railcars since 2015 as you can see from the following slide from Greenbrier’s investor presentation. The good news is that this trend is expected to reverse with demand projected to start improving next year. With the Biden administration blocking oil pipeline construction, more oil is likely to be transported by rail and this would benefit Greenbrier. So would a post-pandemic rebound in economic activity. There have been concerns about capital allocation and succession planning at Greenbrier as Mr. Furman is 76 years old and is expected to retire in September 2022.

GBX Railcar Demand Actual and Estimated

GBX Railcar Demand Actual and Estimated (source: GBX Investor Presentation)

You can view the list of recent insider transactions for The Greenbrier Companies, Inc. here.

P/E: 183.37 Forward P/E: 19.81 Industry P/E: 38.70
P/S: 0.69 Price/Book: 1.21 EV/EBITDA: 14.73
Market Cap: $1.45B Avg. Daily Volume: 426,674 52 Week Range: $15.22 – $50.21

2. GEE Group, Inc. (JOB): $0.6125

Shares of this staffing and placement services provider were acquired by 4 insiders:

  • Director Darla D. Moore acquired 202,433 shares, paying $0.58 per share for a total amount of $117,139. These shares were purchased indirectly by various entities.
  • CEO Derek E. Dewan acquired 166,666 shares, paying $0.60 per share for a total amount of $100,000. These shares were purchased indirectly by a trust.
  • Senior Vice President, CFO Kim D. Thorpe acquired 83,333 shares, paying $0.60 per share for a total amount of $50,000. These shares were purchased indirectly by FRUS Capital LLC.
  • Director Peter J. Tanous acquired 33,333 shares, paying $0.60 per share for a total amount of $20,000. Mr. Tanous increased his stake by 15.58% to 247,320 shares with this purchase.

You can view the list of recent insider transactions for GEE Group, Inc. here.

P/E: N/A Forward P/E: -1.98 Industry P/E: N/A
P/S: 0.08 Price/Book: 0.4 EV/EBITDA: 11.31
Market Cap: $10.76M Avg. Daily Volume: 2,128,606 52 Week Range: $0.26 – $2.49

3. Landec Corporation (LNDC): $11.65

Shares of this packaged foods company were acquired by 3 insiders:

  • Director Patrick D. Walsh acquired 10,000 shares, paying $11.26 per share for a total amount of $112,600. Mr. Walsh increased his stake by 33.33% to 40,000 shares with this purchase.
  • Senior VP of Supply Chain Timothy P. Burgess acquired 5,045 shares, paying $9.99 per share for a total amount of $50,400. These shares were purchased indirectly by a trust.
  • Chief Financial Officer John D. Morberg acquired 4,000 shares, paying $11.07 per share for a total amount of $44,260. Mr. Morberg increased his stake by 25.97% to 19,400 shares with this purchase.

Mr. Morberg also acquired shares the week before last along with the CEO and a VP. We wrote the following about Landec after those purchases,

Insiders of Landec have been buyers of the stock for years and the company has little to show for it. Insider buying often helps me discover companies I might not otherwise look at but it is just the starting point in my research.

The current CEO of Landec, Dr. Albert Bolles, stepped into the role in May 2019 and had served on the board since May 2014. He was previously the executive vice president, chief technology and operations officer of ConAgra Foods and vice president, worldwide R&D for PepsiCo Beverage before that. Given this wealth of experience and the long tenure on the board of directors, one would have expected a turn around under his leadership but that has not been the case.

The company reported a net loss $1.31 in fiscal 2020 ended May 2020 and a loss in each of the last 8 quarters. The stock is up a little more than 10% since he took the reins. Maybe this newfound optimism and insider buying is on account of the new CFO John Morberg who joined the company in January of this year. According to the company,

Mr. Morberg brings over 25 years of corporate finance and executive leadership experience with both public and private companies, including as a CEO, CFO, general counsel and board member. Most recently, he was CFO and General Counsel for BL Restaurant Holdings, LLC, a national restaurant chain. Previously, over a ten-year tenure at Garden Fresh Restaurant Corp, he held various roles, including as the CEO, CFO and board member. He also served as CFO of DEI Holdings, Inc., through its initial public offering and through the early stages of being a public company, and worked for eight-years as Vice President and Controller of PETCO. Mr. Morberg began his career at KPMG.

Mr. Morberg has a Juris Doctor from the University of the Pacific, McGeorge School of Law and a BBA, Accounting from the University of San Diego. He is a member of the State Bar of California and holds a CPA license (inactive).

I have analyzed the company several times over the years and decided not to buy every time I looked at them. A new management team and insider buying notwithstanding, I would like to see some positive momentum in the business before I would get interested in Landec.

You can view the list of recent insider transactions for Landec Corporation here.

P/E: N/A Forward P/E: 129.44 Industry P/E: 24.61
P/S: 0.58 Price/Book: 1.67 EV/EBITDA: 36.21
Market Cap: $327.65M Avg. Daily Volume: 129,411 52 Week Range: $7.48 – $12.24

4. Syndax Pharmaceuticals, Inc. (SNDX): $15.47

Director Dennis Podlesak acquired 13,967 shares of this clinical-stage biopharmaceutical company, paying $14.11 per share for a total amount of $197,077. Mr. Podlesak increased his stake by 47.62% to 43,300 shares with this purchase.

You can view the list of recent insider transactions for Syndax Pharmaceuticals, Inc. here.

P/E: N/A Forward P/E: -7.51 Industry P/E: N/A
P/S: 472.5 Price/Book: 2.94 EV/EBITDA: -6.58
Market Cap: $716.78M Avg. Daily Volume: 903,165 52 Week Range: $11.27 – $27.85

5. Bank of Marin Bancorp (BMRC): $35.93

Director James C. Hale III acquired 5,000 shares of this regional bank, paying $35.76 per share for a total amount of $178,788. These shares were purchased indirectly by a trust.

You can view the list of recent insider transactions for Bank of Marin Bancorp here.

P/E: 15.3 Forward P/E: 15.55 Industry P/E: N/A
P/S: 4.7 Price/Book: 1.36 EV/EBITDA: N/A
Market Cap: $480.82M Avg. Daily Volume: 48,620 52 Week Range: $26.59 – $42.19

You can view the full list of purchases from this Insider Buying page.

Notable Insider Sales:

1. Coinbase Global, Inc. (COIN): $291.6

Shares of this cryptocurrency exchange were sold by 2 insiders:

  • Director Frederick Ernest Ehrsam III sold 264,500 shares for $327.24, generating $86.55 million from the sale.  These shares were sold indirectly by a trust.
  • Director Marc L. Andreessen sold 19,249 shares for $329.70, generating $6.35 million from the sale. These shares were sold indirectly by AH Capital Management, L.L.C.

You can view the list of recent insider transactions for Coinbase Global, Inc. here.

P/E: N/A Forward P/E: N/A Industry P/E: 19.33
P/S: 45.51 Price/Book: N/A EV/EBITDA: 36.8
Market Cap: $58.01B Avg. Daily Volume: 25,982,487 52 Week Range: $282.07 – $429.54

2. Facebook, Inc. (FB): $301.13

COB and CEO Mark Zuckerberg sold 204,000 shares of Facebook for $301.26, generating $61.46 million from the sale. These shares were sold indirectly by various entities.

You can view the list of recent insider transactions for Facebook, Inc. here.

P/E: 29.84 Forward P/E: 22.24 Industry P/E: 43.17
P/S: 9.96 Price/Book: 6.69 EV/EBITDA: 20.41
Market Cap: $856.56B Avg. Daily Volume: 19,511,938 52 Week Range: $182.56 – $315.88

3. The Charles Schwab Corporation (SCHW): $67.14

Chairman Charles R. Schwab sold 520,710 shares of Charles Schwab for $65.29, generating $33.99 million from the sale. These shares were sold indirectly by a trust.

You can view the list of recent insider transactions for The Charles Schwab Corporation here.

P/E: 28.96 Forward P/E: 20.16 Industry P/E: 19.33
P/S: 8.94 Price/Book: 2.27 EV/EBITDA: N/A
Market Cap: $123.29B Avg. Daily Volume: 7,993,822 52 Week Range: $31.63 – $68.89

4. Zoom Video Communications, Inc. (ZM): $336.88

Shares of Zoom were sold by 3 insiders:

  • Chief Executive Officer Eric S. Yuan sold 96,154 shares for $321.26, generating $30.89 million from the sale. These shares were sold indirectly by a trust.
  • Chief Revenue Officer Ryan Azus sold 6,250 shares for $319.61, generating $1.99 million from the sale. These shares were sold indirectly by a trust.
  • Chief Operating Officer Aparna Bawa sold 2,593 shares for $326.18, generating $845,774 from the sale.

You can view the list of recent insider transactions for Zoom Video Communications, Inc. here.

P/E: 149.59 Forward P/E: 81.77 Industry P/E: N/A
P/S: 35.75 Price/Book: 25.61 EV/EBITDA: 135.73
Market Cap: $94.8B Avg. Daily Volume: 4,513,968 52 Week Range: $132.67 – $588.84

5. Workday, Inc. (WDAY): $254.8

Shares of this enterprise cloud applications provider were sold by 3 insiders:

  • President & CFO Robynne Sisco sold 29,432 shares for $256.69, generating $7.55 million from the sale.
  • COO & Executive Vice President James Bozzini sold 14,666 shares for $257.83, generating $3.78 million from the sale.
  • EVP, General Counsel & Secretary Richard Harry Sauer sold 6,408 shares for $257.61, generating $1.65 million from the sale.

You can view the list of recent insider transactions for Workday, Inc. here.

P/E: N/A Forward P/E: 73.22 Industry P/E: 62.01
P/S: 14.15 Price/Book: 18.89 EV/EBITDA: 488.63
Market Cap: $61.12B Avg. Daily Volume: 1,833,655 52 Week Range: $144.47 – $282.77

You can view the full list of sales from this Insider Sales page.

The list of all insider purchases and sales by management people is only available to InsideArbitrage Premium members.

Disclaimer: I hold long positions in Zoom (ZM) and Workday (WDAY). Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.

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