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%.
Silver Spring Networks (SSNI) provides networking platform and solutions that enable utilities to transform the power grid infrastructure into the smart grid.
Insider selling during the last 30 days
Here is a table of Silver Spring Networks' insider-trading activity during the last 30 days by insider.
|Name||Title||Trade Date||Shares Sold||Rule 10b5-1||Current Ownership||Decrease In Ownership|
|Eric Dresselhuys||EVP||Jan 2-22||9,860||Yes||13,762 shares||41.7%|
|Daniel Middleton||EVP||Dec 26-Jan 22||5,250||Yes||30,102 shares + 42,583 options||6.7%|
|Scott Lang||CEO||Jan 2-21||23,512||Yes|
|Thomas Kuhn||Director||Dec 30-Jan 21||2,000||Yes||18,763 shares + 10,000 options||6.5%|
|Anil Gadre||EVP||Jan 7||1,315||Yes||116 shares||91.9%|
There have been 41,937 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 Silver Spring Networks' insider-trading activity by calendar month.
|Month||Insider selling / shares||Insider buying / shares|
There have been 1,191,915 shares sold, and there have been 8,539 shares purchased by insiders since March 2013. The month of December has seen the most insider selling.
Silver Spring Networks reported the third-quarter financial results on October 30 with the following highlights:
|Net loss||$12.3 million|
Silver Spring Networks reported preliminary fourth-quarter results on January 16 with the following highlights:
|GAAP revenue||$95-$96 million||$325-$326 million|
|GAAP EPS||-$0.02 to $0.00||-$4.55 to -$4.57|
The stock plunged after these results.
|Qtrly Rev Growth (yoy):||0.83||0.02||-0.38|
|PEG (5 yr expected):||N/A||0.27||-0.50|
Silver Spring Networks has the highest P/S ratio among these three companies.
Here is a table of these competitors' insider-trading activities during the last 12 months.
|Company||Insider buying / shares||Insider selling / shares|
Only Silver Spring Networks has seen intensive insider selling during the last 30 days.
There have been five different insiders selling Silver Spring Networks, and there have not been any insiders buying Silver Spring Networks during the last 30 days. Two of these five insiders decreased their holdings by more than 10%. Silver Spring Networks has an insider ownership of 1.40%.
Silver Spring Networks has a $9.0 price target from the Point and Figure chart. I believe there is an opportunity for a short entry with the $9.0 price target. I would place a stop loss at $23.60, which is the six-month high. The four main reasons for the proposed short entry are bearish Point and Figure chart, negative earnings, relatively high P/S ratio, and the intensive insider-selling activity.