After trading mostly flat for most of Monday, shares of Elon Musk’s solar power play SolarCity (NASDAQ:SCTY) flared up by nearly one full percentage point in after-hours trading, after it was revealed that SolarCity’s CFO, Brad Buss, had nearly doubled his stake in the company.
According to a Form 4 filing with the SEC, Mr. Buss acquired 6,000 shares of SolarCity on Monday, paying $54.87 per share, and increasing his stake in the firm to 14,000 shares. This was the first insider purchase of SolarCity shares this month, and the first reported insider acquisition since company director Nancy Pfund acquired 35,991 shares, in an apparent $0-value stock grant, last month.
But is this the trigger that should tell you, too, to buy?
What does it mean to you?
Perhaps not. Take Pfund’s acquisition, for example. At the same time as Ms. Pfund was “acquiring” 35,991 shares of SolarCity, she was simultaneously “disposing” of 449,279 shares, according to SEC filings.
Indeed, across all insider transactions reported for SolarCity over the past three months, while “sell” and “buy” transactions are equally matched at five each, the total number of actually shares sold in those transactions outweighs the number of shares bought by more than 10 times. Net shares sold amount to 1,384,638 over the past quarter.
On top of all this, there’s the nagging detail that SolarCity, which sells for a valuation of 20.6 times sales, is currently burning cash, and losing money. In fact, SolarCity has not earned a full-year net profit in more than three years, and while its reported losses under generally accepted accounting principles are finally shrinking, its rate of cash-burn is still growing.
Long story short, just because one insider has bought a few shares this week, doesn’t mean you should necessarily follow suit.
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