Oracle: 5 Different Insiders Have Sold Shares During The Last 30 Days

Apr. 3.14 | About: Oracle Corporation (ORCL)

Summary

Five insiders sold Oracle stock within one month.

The stock was not purchased by any insiders in the month of intensive selling.

Three of these five insiders decreased their holdings by more than 10%.

Oracle Corporation (NYSE:ORCL) develops, manufactures, markets, hosts, and supports database and middleware software, applications software and hardware systems.

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Insider selling during the last 30 days

Here is a table of Oracle's insider activity during the last 30 days by insider.

Name Title Trade Date Shares Sold Rule 10b5-1 Option Exercise Profit Current Ownership Decrease In Ownership
Mark Hurd President April 1 500,000 Yes Yes $8,720,150 1,000 shares + 5,900,000 options 7.8%
Corey West SVP March 31 50,000 Yes Yes $1,015,000 5,000 shares 90.9%
Dorian Daley SVP March 25 100,000 Yes Yes $1,722,570 5,000 shares + 200,000 options 32.8%
Jeffrey Henley Chairman March 21 750,000 Yes Yes $21,019,725 1,934,516 shares 27.9%
Hector Garcia-Molina Director March 17 2,500 Yes Yes $64,287 5,000 shares + 20,000 options 9.1%
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There have been 1,402,500 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 Oracle's insider activity by calendar month.

Month Insider selling / shares Insider buying / shares
April 2014 500,000 0
March 2014 902,500 0
February 2014 2,500 0
January 2014 2,502,500 0
December 2013 906,706 0
November 2013 2,500 0
October 2013 1,602,500 0
September 2013 1,032,500 0
August 2013 32,500 0
July 2013 2,962,500 0
June 2013 552,500 0
May 2013 2,909 0
April 2013 52,917 0
March 2013 527,917 0
February 2013 2,917 0
January 2013 42,917 0
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There have been 11,628,783 shares sold, and there have been zero shares purchased by insiders since January 2013.

Financials

Oracle reported the fiscal 2014 third-quarter, which ended February 28, financial results on March 18 with the following highlights:

Revenue $9.3 billion
GAAP net income $2.6 billion
Cash $37.2 billion
Debt $24.2 billion
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Four of these five insiders sold their shares after these results.

Outlook

Oracle's fiscal 2014 fourth-quarter guidance is as follows:

Revenue growth 3%-7%
GAAP EPS $0.79-$0.86
Non-GAAP EPS $0.92-$0.99
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Competition

Oracle's competitors include Microsoft (NASDAQ:MSFT), International Business Machines (NYSE:IBM), and SAP AG (NYSE:SAP). Here is a table comparing these companies.

Company ORCL MSFT IBM SAP
Market Cap: 183.22B 342.57B 201.08B 96.31B
Employees: 120,000 99,000 431,212 66,572
Qtrly Rev Growth (yoy): 0.04 0.14 -0.06 0.02
Revenue: 37.90B 83.43B 99.75B 21.77B
Gross Margin: 0.82 0.71 0.49 0.70
EBITDA: 16.49B 31.83B 25.02B 7.45B
Operating Margin: 0.39 0.34 0.20 0.30
Net Income: 11.12B 22.82B 16.48B 4.31B
EPS: 2.39 2.70 14.94 3.60
P/E: 17.19 15.28 12.92 22.45
PEG (5 yr expected): 1.36 2.01 1.20 1.77
P/S: 4.88 4.12 2.03 4.48
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Oracle has the highest P/S ratio among these four companies.

Here is a table of these competitors' insider activities this year.

Company Insider buying / shares Insider selling / shares
MSFT 0 20,083,400
IBM 0 56,884
SAP N/A N/A
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Only Oracle 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%.

Conclusion

There have been five different insiders selling Oracle, and there have not been any insiders buying Oracle during the last 30 days. Three of these five insiders decreased their holdings by more than 10%. The five insiders made a combined profit of $32,541,732. Oracle has an insider ownership of 23.68%.

There are 20 analyst buy ratings, 19 neutral ratings, and two sell ratings with an average price target of $40.78. Before going short Oracle, I would like to get a bearish confirmation from the Point & Figure chart. The three main reasons for the proposed short entry are a relatively high P/S ratio, bearish analyst price targets, 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.