Kulicke And Soffa Industries: 3 Different Insiders Have Sold Shares During The Last 30 Days

|
 |  About: Kulicke and Soffa Industries, Inc. (KLIC)
by: Markus Aarnio

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%.

Kulicke and Soffa Industries (NASDAQ:KLIC) designs, manufactures, and sells capital equipment and expendable tools to assemble semiconductor devices, including integrated circuits, discrete devices, light-emitting diodes, and power modules.

Click to enlarge

Insider selling during the last 30 days

Here is a table of Kulicke and Soffa'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
Bruno Guilmart CEO Dec 18-30 150,000 Yes 567,540 shares 20.9%
Nelson Wong VP Dec 13-23 20,000 Yes 35,604 shares 36.0%
Jonathan Chou CFO Dec 13 21,703 Yes 102,584 shares 17.5%
Click to enlarge

There have been 191,703 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 Kulicke and Soffa's insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
December 2013 191,703 0
November 2013 16,000 0
October 2013 29,581 0
September 2013 77,200 0
August 2013 0 0
July 2013 7,997 0
June 2013 0 0
May 2013 16,000 0
April 2013 11,767 0
March 2013 27,095 0
February 2013 15,952 0
January 2013 13,771 0
Click to enlarge

There have been 407,066 shares sold, and there have been zero shares purchased by insiders this year. The month of December has seen the most insider selling.

Financials

Kulicke and Soffa reported the fiscal 2013 full-year, which ended September 28, financial results on November 7 with the following highlights:

Revenue $534.9 million
Net income $59.4 million
Cash $525.0 million
Click to enlarge

Click to enlarge

(Source: Earnings presentation)

Kulicke and Soffa has had a negative revenue growth since 2011.

KLIC Revenue (<a href=

Outlook

Kulicke and Soffa expects net revenue in the first fiscal quarter of 2014 ending December 28, 2013 to be approximately $70 million to $80 million.

Competition

Kulicke and Soffa's competitors include BE Semiconductor Industries N.V. (OTC:BESIY). Here is a table comparing these two companies.

Company KLIC BESIY Industry Average (Semiconductor Equipment & Materials)
Market Cap: 1.01B 414.81M 280.45M
Employees: 1,914 1,449 700.00
Qtrly Rev Growth (yoy): -0.36 -0.12 0.10
Revenue: 534.94M 334.29M 171.88M
Gross Margin: 0.46 0.39 0.33
EBITDA: 86.19M 30.63M 6.63M
Operating Margin: 0.13 0.08 0.03
Net Income: 59.36M 20.35M N/A
EPS: 0.78 0.54 N/A
P/E: 17.03 20.51 26.01
PEG (5 yr expected): N/A N/A 0.81
P/S: 1.88 1.24 1.78
Click to enlarge
Click to enlarge

Kulicke and Soffa has a higher P/S ratio than its direct competitor.

Conclusion

There have been three different insiders selling Kulicke and Soffa, and there have not been any insiders buying Kulicke and Soffa during the last 30 days. All three of these insiders decreased their holdings by more than 10%. Kulicke and Soffa has an insider ownership of 1.90%.

Before entering short Kulicke and Soffa, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are negative revenue growth, 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.