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Facebook Inc (FB): What Do Huge Insider Sales Mean?

Insider trades of Facebook Inc (NASDAQ:FB) have made a good chunk of money, if you consider the low price that the stock was trading at the closing bell on the last trading day. In an article on Baron’s, Grace L Williams revealed who were the main actors of these insider trades.

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Williams mentioned that five insider trades amounting to $80,622,486 involving 1,043,376 shares put the average price of the Facebook Inc (NASDAQ:FB) shares at $77.27. The trades which were conducted between 4th September and 7th October were all conducted on the basis of the Rule 10b5-1, which means that the traders had set the time of the trades in advance so as to ensure the other market participants that they weren’t seeking to unjustly profit from any information that was not made public at the time of the trade.

If you take into account that Facebook Inc (NASDAQ:FB) was last seen trading at $72.91 on NASDAQ, it raises the question whether these trades mean that the stock price will further dip?

The answer is No, if you consider it in the context of these insider trades. There are two reasons for this.

Firstly, a huge bulk of these trades was carried out by Facebook Inc (NASDAQ:FB)’s Chief Operating Officer, Sheryl Sandberg, who sold 850,002 shares, according to Williams. The trade was a natural outcome in atleast two ways. Firstly, Facebook Inc (NASDAQ:FB) reached an all time high of $79.71 on 30th September, and secondly Sandberg already owns a large amount of Facebook shares under her fcontract. Thus, her sale was part of a hedging strategy of sorts in order to diversify her wealth.

Secondly, the dip in Facebook Inc (NASDAQ:FB)’s price has nothing to do with the company’s fundamentals, which still remain strong. Instead, it is a result of global macroeconomic weakness especially in the Euro Zone.

Hence, these latest insider trades mean little as far strength of Facebook Inc (NASDAQ:FB)’s business is concerned.

Disclosure: none

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