Glu Mobile: 3 Different Insiders Have Sold Shares This Month

Dec.28.13 | About: Glu Mobile (GLUU)

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%.

Glu Mobile (NASDAQ:GLUU) develops and publishes a portfolio of action/adventure and casual games for the users of smartphones and tablet devices.

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Insider selling during the last 30 days

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

Name Title Trade Date Shares Sold Rule 10b5-1 Current Ownership Decrease In Ownership
Hany Nada Director Dec 23-24 328,779 Yes 5,394,439 shares 5.7%
Matthew Ricchetti President of Studios Dec 12-23 62,500 Yes 0 shares + 237,500 options 20.8%
Niccolo de Masi CEO Dec 23 150,000 Yes 44,909 shares + 900,000 options 13.7%
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There have been 541,279 shares sold by insiders during the last 30 days. All these shares were sold pursuant to a Rule 10b5-1 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 Glu Mobile's insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
December 2013 541,279 0
November 2013 0 0
October 2013 225,000 0
September 2013 0 0
August 2013 0 0
July 2013 0 0
June 2013 0 0
May 2013 0 0
April 2013 0 0
March 2013 733,540 0
February 2013 794,600 0
January 2013 0 0
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There have been 2,294,419 shares sold, and there have been zero shares purchased by insiders this year.

Financials

Glu Mobile reported the third-quarter financial results on October 30 with the following highlights:

GAAP Revenue $21.7 million
GAAP Net loss $8.0 million
Cash $27.7 million
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(Source: Earnings presentation)

Outlook

Glu Mobile's guidance is as follows:

  Q4/2013 FY2013
Non-GAAP revenue $31.5-$32.5 million $102.0-$103.0 million
Non-GAAP net income $0-$0.4 million -$10.5 to -$11.0 million
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(Source: Earnings presentation)

Glu Mobile provided an estimated initial baseline total non-GAAP revenue growth rate of approximately 15% to 20% for 2014 from the full year 2013 guidance set forth above.

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(Source: Earnings presentation)

Competition

Glu Mobile's competitors include DeNA Co (OTC:DNACF), and Electronic Arts (NASDAQ:EA). Here is a table comparing these companies.

Company GLUU DNACF EA
Market Cap: 293.11M 2.62B 7.32B
Employees: 521 2,108 9,300
Qtrly Rev Growth (yoy): -0.17 -0.05 -0.02
Revenue: 97.08M 2.60B 3.78B
Gross Margin: 0.69 0.70 0.65
EBITDA: -16.83M 982.85M 441.00M
Operating Margin: -0.25 0.34 0.06
Net Income: -23.45M 537.98M 227.00M
EPS: -0.34 4.04 0.74
P/E: N/A 4.99 32.20
PEG (5 yr expected): -0.84 N/A 1.14
P/S: 3.16 1.01 1.95
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Glu Mobile has the highest P/S ratio among these three companies. In Electronic Arts, there have been 1,244,614 shares sold, and there have been 31,300 shares purchased by insiders this year. Only Glu Mobile has seen intensive insider selling during the last 30 days.

Conclusion

There have been three different insiders selling Glu Mobile, and there have not been any insiders buying Glu Mobile during the last 30 days. Two of these three insiders decreased their holdings by more than 10%. Glu Mobile has an insider ownership of 25.75%.

Before entering short Glu Mobile, I would like to get a bearish confirmation from the Point and Figure chart. The three main reasons for the proposed short entry are negative earnings, relatively high P/S ratio, and the intensive insider-selling activity.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within 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.