Adobe: 6 Different Insiders Have Sold Shares During The Last 30 Days

Jan.14.14 | About: Adobe Systems (ADBE)

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%.

Adobe Systems Incorporated (NASDAQ:ADBE) operates as a diversified software company worldwide.

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Insider selling during the last 30 days

Here is a table of Adobe'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
Robert Burgess Director Jan 10 94,832 No 50,629 shares 65.2%
Mark Garrett CFO Jan 7 11,899 Yes 50,107 shares 19.2%
Shantanu Narayen CEO Jan 2 50,000 Yes 231,672 shares + 488,300 options 6.5%
David Wadhwani SVP Dec 19 28,010 No 25,875 shares 52.0%
John Warnock Director Dec 16 20,000 No 784,211 shares 2.5%
Edward Barnholt Director Dec 16 50,000 No 25,124 shares 66.6%
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There have been 254,741 shares sold by insiders during the last 30 days. Mark Garrett and Shantanu Narayen 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 Adobe's insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
January 2014 156,731 0
December 2013 163,010 0
November 2013 57,740 0
October 2013 6,175,000 0
September 2013 96,056 0
August 2013 65,000 0
July 2013 813,939 0
June 2013 450,276 0
May 2013 0 0
April 2013 324,073 0
March 2013 465,962 0
February 2013 0 0
January 2013 284,177 5,000
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There have been 9,051,964 shares sold, and there have been 5,000 shares purchased by insiders since January 2013.


Adobe reported the fiscal 2013 full-year, which ended November 29, financial results on December 12 with the following highlights:

Revenue $4.1 billion
Net income $290.0 million
Cash $3.2 billion
Debt $1.5 billion
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Adobe's guidance is as follows:

Q1/2014 FY2014
Revenue $950-$1,000 million $4.1 billion
Non-GAAP EPS $0.22-$0.28 $1.10
GAAP EPS $0.02-$0.08 $0.27
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(Source: Earnings presentation)


Adobe's competitors include Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), and Avid Technology (NASDAQ:AVID). Here is a table comparing these companies.

Market Cap: 29.73B 479.51B 300.86B 286.10M
Employees: N/A 80,300 99,000 1,787
Qtrly Rev Growth (yoy): -0.10 0.04 0.16 -0.23
Revenue: 4.06B 170.91B 80.37B 622.45M
Gross Margin: 0.86 0.38 0.74 0.52
EBITDA: 769.06M 55.76B 31.37B 7.43M
Operating Margin: 0.11 0.29 0.35 -0.03
Net Income: 289.98M 37.04B 22.64B -69.93M
EPS: 0.56 39.75 2.67 -1.81
P/E: 106.30 13.41 13.49 N/A
PEG (5 yr expected): 4.51 0.87 1.88 N/A
P/S: 7.28 2.82 3.69 0.44
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Adobe has the highest P/S ratio among these four companies.

Here is a table of these competitors' insider-trading activities during the last 30 days.

Company Insider buying / shares Insider selling / shares
AAPL 0 3,066
MSFT 0 19,800
AVID 0 0
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Only Adobe has seen intensive insider selling during the last 30 days.


There have been six different insiders selling Adobe, and there have not been any insiders buying Adobe during the last 30 days. Four of these six insiders decreased their holdings by more than 10%. Adobe has an insider ownership of 0.38%.

Before entering short Adobe, 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 am short AAPL, . 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.