Motorcar Parts Of America: 5 Different Insiders Have Sold Shares During The Last 30 Days

| About: Motorcar Parts (MPAA)

In this article, I will feature one consumer 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%.

Motorcar Parts of America (NASDAQ:MPAA) engages in manufactures, remanufactures, and distributes aftermarket automobile parts primarily in the United States and Canada.

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Insider selling during the last 30 days

Here is a table of Motorcar Parts Of America'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
Rudolph Borneo Director Jan 6 25,000 No 20,000 shares 55.6%
Mel Marks Director Jan 2 24,000 Yes 340,746 shares 6.6%
Steven Kratz COO Dec 13 8,500 No 13,900 shares 37.9%
Kevin Daly CAO Dec 12 5,000 No 9,200 shares 35.2%
Joffe Selwyn CEO Dec 10 100,000 No 127,130 shares 44.0%
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There have been 162,500 shares sold by insiders during the last 30 days. Only Mel Marks sold shares 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 Motorcar Parts Of America's insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
January 2014 49,000 0
December 2013 256,247 0
November 2013 27,168 0
October 2013 39,486 0
September 2013 60,850 0
August 2013 14,750 2,000
July 2013 13,500 0
June 2013 10,000 0
May 2013 0 0
April 2013 0 0
March 2013 23,120 0
February 2013 30,000 0
January 2013 43,827 1,000
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There have been 567,948 shares sold, and there have been 3,000 shares purchased by insiders since January 2013. The month of December has seen the most insider selling.

Financials

Motorcar Parts Of America reported the fiscal 2014 second-quarter, which ended September 30, financial results on November 12 with the following highlights:

Revenue $66.2 million
Net income $2.2 million
Cash $24.0 million
Debt $102.9 million
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Competition

Motorcar Parts Of America's competitors include Federal-Mogul (NASDAQ:FDML), and Remy International (NASDAQ:REMY). Here is a table comparing these companies.

Company MPAA FDML REMY
Market Cap: 290.05M 3.39B 682.69M
Employees: 2,756 45,000 6,631
Qtrly Rev Growth (yoy): 0.15 0.09 -0.05
Revenue: 418.23M 6.85B 1.10B
Gross Margin: 0.14 0.14 0.20
EBITDA: -1.17M 483.00M 131.94M
Operating Margin: -0.02 0.03 0.09
Net Income: -98.11M 15.00M 38.93M
EPS: 2.10 -0.19 1.24
P/E: 9.46 N/A 17.18
PEG (5 yr expected): 1.02 N/A N/A
P/S: 0.69 0.46 0.62
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Motorcar Parts Of America has the highest P/S ratio among these three companies.

Here is a table of these competitors' insider-trading activities during the last six months.

Company Insider buying / shares Insider selling / shares
FDML 0 0
REMY

0

92,276
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Only Motorcar Parts of America has seen intensive insider selling during the last 30 days.

Conclusion

There have been five different insiders selling Motorcar Parts Of America, and there have not been any insiders buying Motorcar Parts Of America during the last 30 days. Four of these five insiders decreased their holdings by more than 10%. Motorcar Parts Of America has an insider ownership of 1.50%.

Before entering short Motorcar Parts Of America, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are 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.