Past research suggests that market participants should perceive insider buying as being much more informative and predictive than insider selling, and rightly so. While corporate insiders are usually buying shares in their own companies because they anticipate better times ahead, Board members and executives can sell shares for a wide range of reasons that may not be related to their companies’ current fundamentals or future prospects.
Although insiders could be selling shares simply to raise capital for personal needs, this does not necessarily imply that all insider sales are not informative. A cluster of insider selling may serve as a strong signal that a company’s market value is approaching or even exceeding its fair market value, as these clusters of selling generally show that there is a consensus among insiders on the possibility that a company’s shares are overvalued. Having this in mind, the following article will discuss several noteworthy insider buys and sales reported with the SEC on Wednesday.
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CEO of Struggling U.S. Footwear Maker Buys Half a Million Shares
To begin with, let’s have a look at the voluminous insider buying observed at Skechers USA Inc. (NYSE:SKX). Chief Executive Officer Robert Greenberg filed Wednesday to disclose the purchases of 250,000 Class A shares on Monday and an additional 250,000 shares on Tuesday, all of which are held indirectly by the Greenberg Family Trust. The shares were purchased at a weighted average price of $21.96 per share. Mr. Greenberg also owns a direct ownership stake of 277,693 shares.
After the somewhat surprising sale of 150,000 shares completed by Michael Greenberg, the CEO’s son and the President of Skechers, earlier this month following the release of weaker-than-expected top- and bottom-line figures, the CEO’s purchases discussed above represent a sign of confidence in the future prospects of the apparel company. The footwear maker has been recently hit by a sluggish retail environment in the United States, wide-spread discounting, as well as a shorter back-to-school period. As Skechers USA Inc. (NYSE:SKX) has been struggling against tough competition in the United States, the company plans to drive growth in Asia. Just recently, the company formed a new joint venture with Luen Thai Enterprises in South Korea in an attempt to grow its business in the country and penetrate the region. The shares of Skechers are down 24% thus far in 2016. Daniel S. Och’s OZ Management added a 2.98 million-share stake in Skechers USA Inc. (NYSE:SKX) to its pool of holdings during the third quarter.
Let’s head to the next two pages of this insider trading article, where we’ll discuss more insider buying and selling observed at other companies.