In this article, I will feature one tech stock that has seen intensive insider selling during the last 30 days. Intensive insider selling can be defined by the following three criteria:
- The stock was sold by three or more insiders within one month.
- The stock was not purchased by any insiders in the month of intensive selling.
- At least two sellers decreased their holdings by more than 10%.
Salesforce.com (NYSE:CRM) provides cloud computing and social enterprise solutions to various businesses and industries worldwide.
Insider selling during the last 30 days
Here is a table of salesforce.com's insider-trading activity during the last 30 days by insider.
|Name||Title||Trade Date||Shares Sold||Current Ownership (shares+options)||Decrease In Ownership|
|Lawrence Tomlinson||Director||Sep 26 -Oct 3||6,000||32,800 shares||15.5%|
|Hilarie Koplow||President||Oct 2||8,336||93,152 shares||8.2%|
|Craig Conway||Director||Oct 1||1,600||17,456 shares||8.4%|
|Daniel Crump||President||Sep 30||9,614||14,447 shares + 278,805 options||3.2%|
|Maria Martinez||EVP||Sep 11-30||105,393||5,248 shares + 77,783 options||55.9%|
|Frank van Veenendaal||Vice Chairman||Sep 9-24||264,601||23,462 shares + 10,000 options||88.8%|
|Craig Ramsey||Director||Sep 24||15,000||1,381,384 shares||1.1%|
There have been 410,544 shares sold by insiders during the last 30 days.
Lawrence Tomlinson, Hilarie Koplow, Craig Conway, Daniel Crump and Frank van Veenendaal sold their shares pursuant to a Rule 10b5-1 trading plan. Maria Martinez and Craig Ramsey sold their shares without the Rule 10b5-1 trading plan.
SEC Rule 10b5-1 is a regulation enacted by the United States Securities and Exchange Commission (SEC) in 2000. The SEC states that Rule 10b5-1 was enacted in order to resolve an unsettled issue over the definition of insider trading, which is prohibited by SEC Rule 10b-5. After Rule 10b5-1 was enacted, the SEC staff publicly took the position that canceling a planned trade made under the safe harbor does not constitute insider trading, even if the person was aware of the inside information when canceling the trade. This staff interpretation raises the possibility that executives can exploit this safe harbor by entering into 10b5-1 trading plans before they have inside information while retaining the option to later cancel those plans based on inside information.
For example, a CEO of a company could call a broker on January 1 and enter into a plan to sell a particular quantity of shares of his company's stock on March 1, find out terrible news about his company on February 1 that will not become public until April 1, and then go forward with the March 1 sale anyway, saving himself from losing money when the bad news becomes public. Under the terms of Rule 10b5-1(b) this is insider trading because the CEO "was aware" of the inside information when he made the trade. But he can assert an affirmative defense under Rule 10b5-1(c), because he planned the trade before he learned the inside information.
In general, it is a safer way for an insider to sell shares pursuant to a Rule 10b5-1 trading plan than without it.
Insider selling by calendar month
Here is a table of salesforce.com's insider-trading activity by calendar month.
|Month||Insider selling / shares||Insider buying / shares|
There have been 1,204,821 shares sold and there have been zero shares purchased by insiders this year. The month of September has seen the most insider selling this year.
Salesforce.com reported the fiscal 2014 second-quarter, which ended July 31, financial results on August 29, with the following highlights:
|Net income||$76.6 million|
Q3 FY14 Guidance:
- Revenue for the company's third fiscal quarter is projected to be in the range of $1.050 billion to $1.055 billion, an increase of 33% to 34% year-over-year. GAAP net loss per share is expected to be in the range of ($0.19) to ($0.18), while diluted non-GAAP EPS is expected to be in the range of $0.08 to $0.09.
Full Year FY14 Guidance:
- Revenue for the company's full fiscal year 2014 is projected to be in the range of $4.000 billion to $4.025 billion, an increase of 31% to 32% year-over-year. GAAP net loss per share is expected to be in the range of ($0.44) to ($0.42) while diluted non-GAAP EPS is expected to be in the range of $0.32 to $0.34.
Salesforce.com's P/S ratio is above the industry average, which could explain some of the insider selling.
Here is a table of these competitors' insider-trading activities this year.
|Company||Insider buying / shares||Insider selling / shares|
Oracle has also seen intensive insider selling during the past 30 days.
There have been seven different insiders selling salesforce.com and there have not been any insiders buying salesforce.com during the past 30 days. Three of these seven insiders decreased their holdings by more than 10%. Salesforce.com has an insider ownership of 0.40%.
Salesforce.com is currently trading at a forward P/E ratio of 101.40 and the company has a book value of $4.75 per share. Before entering short salesforce.com, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are high P/S ratio and the intensive insider selling activity.
Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in ORCL over the next 72 hours. 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.