Insiders Sold Ahead Of Fusion-io's Major Selloff: Buy Or Sell At $14 A Share?

| About: Fusion-io, Inc. (FIO)

Fusion-io (NYSE:FIO) is a technology company that engages in the development, marketing and sale of storage memory platforms for enterprise data decentralization. FIO's integrated hardware and software platform enables the decentralization of data from legacy architectures and specialized hardware. FIO makes popular storage memory platforms including ioDrive, ioFX and ioCache products; directCache data-tiering software; ioTurbine virtualization software; ioSphere platform management software; and ION data accelerator software. Its products are used in various markets, such as financial services, Internet, technology, education, retail, manufacturing, energy, life sciences and government. Some of its highest paying customers are Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB). These two companies rely heavily on FIO's services to decentralize data. Fundamentally, the company seems strong, even though the stock is down significantly from touching $32 in the fall of 2012.

In an earlier piece, I detailed the management shift that rocked the stock from $18 down to $13.13 in one day. Briefly, to summarize, CEO and co-founder David Flynn stepped down concurrently with fellow co-founder Rick White in order to pursue "entrepreneurial investing activities." Both Flynn and White will remain on the board of directors as advisors for the next 12 months. Shane Robison was an executive for Hewlett Packard (NYSE:HPQ) before joining FIO is the new CEO.

Major Insider Selling Happened Just Before The Management Change

I believe that insider selling in April could have been a clue that something was about to happen. Obviously hindsight is 20-20, but the selling was intense and occurred two weeks before a major management shakeup. In order of most recent sales: Neil Carson sold 40,625 shares on April 25th. He currently holds 173,959 options or 0.2% FIO and is Asia Pacific CTO and Vice President. James Dawson sold 75,000 shares on April 24th and 25th. He currently holds 419,458 options or 0.4% of the company. He has served as Executive Vice President, Worldwide Sales, since October 2010. Dennis Wolf sold 15,000 shares on April 24th. Dennis Wolf currently holds 108,650 options or 0.1% of the company. He has served as Chief Financial Officer and Executive Vice President since October 2010. Richard Boberg sold 10,000 shares on April 22nd. Richard Boberg currently controls 184,132 shares or 0.2% of the company. He has served as Executive Vice President, Strategic Business Development and General Manager of Caching Solutions since August 2012. Lance Smith, the COO, sold 19,583 shares on April 18th. He currently holds 118,750 options or 0.1% of the company.

The Stock Should Rise, Bad News All Baked in and Fundamentals Strong

In light of the recent selling by insiders and a sudden management shakeup, I believe buying shares at current levels for the long-term is a good move. Further, I suspect a quick rebound to pre-announcement levels. One possibility that could explain the sudden management change is an upcoming potential sale of the company. Many readers of my previous article suggested Intel (NASDAQ:INTC) might be an interested party as they were once interested in the company when it traded above $25. However, the new CEO Shane Robison came out and denied the company was for sale (5/9). I think a buyout is still possible, as a huge premium to share price offer would be in the best interest of shareholders. Still, this company can stand on its own two legs. It's most recent quarter surprised the Street, as did its guidance for the current quarter. Its purchase of NexGen will also allow FIO to penetrate small and medium sized markets.

In conclusion, I think all of the bad news is now baked into this stock. I bought at $13.20 and I added more at $14.40 today because I think the company is strong. I think it is still a bargain moving forward. The management change, while worrisome, should not impact the business day to day as FIO reaffirmed its guidance. More importantly, insiders have already sold a lot of stock. This selling may have been predictive (recognizing hindsight is 20-20) of the pending management change. While the company is strong, those who follow me into this stock for the mid to long-term should keep an eye out for all future insider selling in the company. Those looking for a quick trade will likely profit as the stock should easily head back over $16 in the next few sessions given that the fundamentals of the company are intact.

Disclosure: I am long FIO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.