It is often believed that insider selling represents a tip-off that corporate insiders anticipate their company’s stock to underperform. However, mild or even heavy insider selling does not necessarily mean that a stock is destined to collapse. At the end of the day, the well-known saying that insiders sell shares for a wide array of reasons holds a grain of truth.
Corporate insiders, namely executives and Board members, usually sell shares for reasons ranging from expiring stock options to financial planning, with most insiders selling shares for personal financial reasons unrelated to possible bad times ahead for their companies. Insider Monkey tries to strip away ‘insignificant’ or ‘routine’ insider selling by ignoring insider transactions conducted under pre-arranged trading plans, which are usually associated with financial planning on the part of insiders, or transactions related to freshly-exercised stock options. The spur-of-the-moment insider selling analyzed by our team should not necessarily be interpreted as conveying bearish information either, as insiders can still sell shares spontaneously for personal needs without taking into consideration firm-specific developments and prospects. That said, the following article will lay out a list of spontaneous insider selling recently observed at three U.S. publicly-traded companies.
Through extensive research, we have determined that the due diligence that the investors in our database employ, as well as their long-term focus makes them perfect targets to emulate. However, the results of our analysis have also shown that the small-cap picks of these funds can generate much better returns, with the 15 most popular small-cap stocks beating the market by an average of 95 basis points per month (read more details here).
Information and Analytics Provider Registers Insider Selling amid Ongoing Merger Process
The insider buying activity at IHS Inc. (NYSE:IHS) has been mute in recent years, whereas insider selling has been gaining steam lately. Vice Chairman Daniel Yergin, a Pulitzer-Prize winning author, discarded 12,445 Class A shares on Wednesday at prices ranging from $114.38 to $115.46 per share, trimming his ownership to 81,784 shares. Dr. Yergin also holds an indirect ownership stake of 12,000 Class A shares, held through an irrevocable trust.
In late March, the U.S. information and analytics provider inked an all-stock merger agreement with a U.K-based market-data company called Markit Ltd. to create a $13 billion London-based data and business research provider. The new company, to be called IHS Markit Ltd., is anticipated to pay a corporate tax rate in the low-to-mid 20% range, whereas U.S. companies pay a much higher rate of 35%. The shareholders of Colorado-based IHS Inc. (NYSE:IHS), whose businesses include Jane’s Defence Weekly and technology industry research firm iSuppli, will own approximately 57% of the combined company at closing. The multi-billion-dollar deal is anticipated to complete in the second half of 2016, with IHS shareholders receiving 3.5566 common shares of Markit for each share of IHS Class A shares owned. The soon-to-be-merged companies identified cost savings of $125 million, as well as revenue opportunities of $100 million that can be achieved by 2019.
There were 20 hedge funds tracked by Insider Monkey with long positions in IHS at the end of the first quarter, as compared to 16 registered at the end of the fourth quarter of 2015. John Griffin’s Blue Ridge Capital was the owner of 1.95 million shares of IHS Inc. (NYSE:IHS) at the end of March.
The next page of this insider trading article will discuss the recent insider selling registered at two other companies.