Micron: 5 Different Insiders Have Sold Shares This Year

Jan.15.14 | About: Micron Technology (MU)

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%.

Micron Technology (NASDAQ:MU) manufactures and markets semiconductor solutions worldwide.

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Insider selling during the last 30 days

Here is a table of Micron'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
Brian Shields VP Jan 10 240,000 No 248,222 shares + 234,250 options 33.2%
Lawrence Mondry Director Jan 10 30,000 Yes 220,834 shares 12.0%
Ronald Foster CFO Jan 9-10 215,000 Yes

683,842 shares + 298,000 options

18.0%
Mark Adams President Jan 9 168,492 No 474,500 shares 26.2%
Mercedes Johnson Director Jan 2 8,000 Yes 108,242 shares 6.9%
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There have been 661,492 shares sold by insiders during the last 30 days. Lawrence Mondry, Ronald Foster, and Mercedes Johnson 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 Micron's insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
January 2014 661,492 0
December 2013 0 0
November 2013 1,569,296 0
October 2013 290,830 0
September 2013 191,850 0
August 2013 641,425 0
July 2013 744,588 0
June 2013 565,846 0
May 2013 313,750 0
April 2013 1,015,693 0
March 2013 4,000 0
February 2013 4,000 0
January 2013 54,000 0
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There have been 6,056,770 shares sold, and there have been zero shares purchased by insiders since January 2013.

Financials

Micron reported the fiscal 2014 first-quarter, which ended November 28, financial results on January 7 with the following highlights:

Revenue $4.0 billion
GAAP net income $358 million
Cash $4.4 billion
Debt $5.8 billion
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(Source: Earnings presentation)

Outlook

Micron expects fiscal 2014 second-quarter DRAM production bit growth to be approximately flat, quarter-to-date ASP to be approximately flat, and cost per bit to be down mid-teens.

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(Source: Earnings presentation)

Competition

Micron's competitors include SanDisk (SNDK), Samsung Electronics (OTC:SSNLF), and Toshiba (OTCPK:TOSBF). Here is a table comparing these companies.

Company MU SNDK SSNLF TOSBF
Market Cap: 24.75B 16.08B 170.15B 18.98B
Employees: 30,900 4,636 N/A 206,000
Qtrly Rev Growth (yoy): 1.20 0.28 0.13 0.16
Revenue: 11.28B 5.98B 202.93B 79.13B
Gross Margin: 0.26 0.44 N/A 0.27
EBITDA: 3.11B 1.93B 47.95B 6.47B
Operating Margin: 0.11 0.25 0.17 0.05
Net Income: 1.82B 918.42M 23.02B 938.64M
EPS: 1.66 3.78 175.84 0.22
P/E: 14.08 18.83 7.39 20.18
PEG (5 yr expected): 1.99 0.54 N/A N/A
P/S: 2.23 2.74 0.84 0.24
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Micron has the second-highest P/S ratio among these four companies. In Sandisk, there have been 81,000 shares sold, and there have been zero shares purchased by insiders during the last 30 days. Only Micron has seen intensive insider selling during the last 30 days.

Conclusion

There have been five different insiders selling Micron, and there have not been any insiders buying Micron during the last 30 days. Four of these five insiders decreased their holdings by more than 10%. Micron has an insider ownership of 0.70%.

Before entering short Micron, I would like to get a bearish confirmation from the Point and Figure chart. The main reason for the proposed short entry is 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.