There were significant insider purchases in Motorola Inc. (MOT) at the end of August. Carl Icahn bought nearly 3.5 million shares on August 25th at a price of $7.49. On August 26th, he bought an additional 8 million shares at a price of $7.50. He kept buying 678500 shares on August 27th, 200000 shares on August 30th, and 2.4 million shares on August 31st at an average price of $7.51. In total he spent $111 million and now he has a total of 250 million shares.
If you imitated his transactions and purchased the shares at $7.5 on August 27th, your total return in 3 weeks would have been 11.7%. Why did Icahn keep buying Motorola shares even though he had 235 million shares? Clearly Icahn thinks that the company is undervalued and $7.5 was an attractive level for him to commit another $100+ million. The real story is that Motorola is trying to split the company in two units. Historically spin-offs have been an attractive area to invest; I will tell you about the details of this at another time. The idea is Motorola’s profitable equipment division will look more attractive after they got rid of the money losing phone unit. The company targets the first quarter of 2011 to achieve the spin-off.
I should warn you that there are other insiders who are selling their shares in the past 3 months. Eugene Delaney sold 12700 shares at $7.88 on August 6th. He still has 585 thousand shares though. Karen Tandy sold 28348 shares at $6.75 on May 21st. She still has 174224 shares. Her ill-timed sales cost her around $50000 so far.