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%.
Guidewire Software (NYSE:GWRE) provides system software to the property and casualty insurance industry primarily in the United States, Canada, Australia, the United Kingdom, and internationally.
Insider selling during the last 30 days
Here is a table of Guidewire'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|
|Priscilla Hung||SVP||Jan 2-8||51,089||Yes||0 shares + 1,563 options||97.0%|
|Kenneth Branson||Director||Jan 7||25,000||Yes||910,179 shares||2.7%|
|Craig Conway||Director||Jan 2||12,000||Yes||191,472 shares||5.9%|
|Alex Naddaff||VP||Dec 19-23||6,233||Yes||1,927 shares + 32,168 options||15.5%|
|Karen Blasing||CFO||Dec 19-23||1,627||Yes||1,794 shares + 9,897 options||12.2%|
|Marcus Ryu||CEO||Dec 18-19||130,000||Yes||401,392 shares||24.5%|
|Jeremy Henrickson||VP||Dec 13||3,000||Yes||71,647 shares + 3,935 options||3.8%|
|Guy Dubois||Director||Dec 13||7,745||Yes||2,413 shares||76.2%|
There have been 236,694 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 Guidewire's insider-trading activity by calendar month.
|Month||Insider selling / shares||Insider buying / shares|
There have been 3,352,681 shares sold, and there have been 2,000 shares purchased by insiders since January 2013.
Guidewire reported the fiscal 2014 first-quarter, which ended October 31, financial results on December 3 with the following highlights:
|GAAP net loss||$10.6 million|
Guidewire's guidance is as follows:
|Revenue||$76-$78 million||$330.5-$342.5 million|
|GAAP net loss||$11.3-$10.1 million||$28.7-$25.7 million|
Guidewire has the highest P/S ratio among these three companies.
Here is a table of these competitors' insider-trading activities during the last 30 days.
|Company||Insider buying / shares||Insider selling / shares|
Only Guidewire has seen intensive insider selling during the last 30 days.
There have been eight different insiders selling Guidewire, and there have not been any insiders buying Guidewire during the last 30 days. Five of these eight insiders decreased their holdings by more than 10%. Guidewire has an insider ownership of 3.00%.
Guidewire has a $38 price target from the Point and Figure chart. I believe there is an opportunity for a short entry with the $38 price target. I would place a stop loss at $52, which is the all-time high. The four main reasons for the proposed short entry are bearish Point and Figure chart, relatively high P/S ratio, high P/E ratio, and the intensive insider-selling activity.
Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in GWRE, 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.