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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:

  1. The stock was sold by three or more insiders within one month.
  2. The stock was not purchased by any insiders in the month of intensive selling.
  3. At least two sellers decreased their holdings by more than 10%.

Synchronoss Technologies (SNCR) provides software-based activation and personal cloud solutions for connected devices.

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Insider selling during the last 30 days

Here is a table of Synchronoss' insider-trading activity during the last 30 days by insider.

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Lawrence IrvingCFODec 17-2326,821Yes132,390 shares + 5,634 options16.3%
Stephen WaldisCEODec 1925,000Yes697,322 shares3.5%
Robert GarciaPresidentDec 119,959Yes69,404 shares12.5%
Paula HilbertEVPNov 29-Dec 95,613Yes25,364 shares + 31,666 options9.0%
Patrick DoranEVPDec 61,623Yes26,554 shares + 1,711 options5.4%

There have been 69,016 shares sold by insiders during the last 30 days.

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 Synchronoss' insider-trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
December 201368,7970
November 201351,2780
October 201355,7600
September 201356,7720
August 201385,5880
July 201390,2140
June 201389,4270
May 2013111,6380
April 201391,3770
March 2013116,5180
February 201378,5510
January 201352,8570

There have been 948,777 shares sold and there have been zero shares purchased by insiders this year.

Financials

Synchronoss reported the third-quarter financial results on November 4 with the following highlights:

Revenue$89.7 million
Net income$3.6 million
Cash$50.8 million
Debt$9.3 million

Outlook

Synchronoss' guidance is as follows:

 Q4/2013FY2013
Non-GAAP revenue$94-$97 million$349-$352 million
Non-GAAP EPS$0.38-$0.41$1.31-$1.34

Competition

Synchronoss' competitors include Amdocs Limited (DOX), CSG Systems International (CSGS), and NeuStar (NSR). Here is a table comparing these companies.

CompanySNCRDOXCSGSNSRIndustry Average (Application Software)
Market Cap:1.22B6.60B939.57M3.12B196.63M
Employees:1,34020,7743,5421,543165.00
Qtrly Rev Growth (yoy):0.300.03-0.020.080.09
Revenue:325.02M3.35B750.93M878.57M56.20M
Gross Margin:0.580.350.490.770.58
EBITDA:65.60M622.33M124.67M369.03M7.72M
Operating Margin:0.100.140.110.34-0.11
Net Income:10.93M412.44M58.08M162.48MN/A
EPS:0.282.531.792.43N/A
P/E:111.9416.3016.5320.5215.88
PEG (5 yr expected):1.171.571.241.171.04
P/S:3.721.971.253.502.78

Synchronoss has the highest P/S ratio among these four companies.

Here is a table of these competitors' insider-trading activities this year.

CompanyInsider buying / sharesInsider selling / shares
DOXN/AN/A
CSGS116,79896,014
NSR029,017

Only Synchronoss has seen intensive insider selling during the last 30 days.

Conclusion

There have been five different insiders selling Synchronoss and there have not been any insiders buying Synchronoss during the last 30 days. Two of these five insiders decreased their holdings by more than 10%. Synchronoss has an insider ownership of 2.40%.

Synchronoss has a $18 price target from the Point and Figure chart. I believe there is an opportunity for a short entry with the $18 price target. I would place a stop loss at $39, which is the 5-year high. The three main reasons for the proposed short entry are bearish Point and Figure chart, relatively high P/S ratio, and the intensive insider-selling activity.

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Source: Synchronoss Technologies: 5 Different Insiders Have Sold Shares This Month