Time Warner Cable: 3 Different Insiders Have Sold Shares During The Last 30 Days

| About: Charter Communications, (CHTR)

Summary

Three insiders sold Time Warner Cable stock within one month.

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

All three of these insiders decreased their holdings by more than 10%.

Time Warner Cable (TWC) offers video, high-speed data, and voice services in the United States.

Click to enlarge

Insider selling during the last 30 days

Here is a table of Time Warner Cable's insider activity during the last 30 days.

Name Title Trade Date Shares Sold Rule 10b5-1 Current Ownership Decrease In Ownership
Glenn Britt Director Mar 17-Apr 7 90,000 Yes 177,542 shares + 207,800 options 18.9%
Robert Marcus CEO Mar 25-Apr 7 32,000 Yes 61,281 shares + 63,345 options 20.4%
Marc Lawrence-Apfelbaum EVP March 20 16,789 Yes 5,830 shares + 4,993 options 60.8%
Click to enlarge

There have been 138,789 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 Time Warner Cable's insider activity by calendar month.

Month Insider selling / shares Insider buying / shares
April 2014 46,000 0
March 2014 122,789 0
February 2014 133,983 0
January 2014 270,000 0
December 2013 30,000 0
November 2013 34,253 0
October 2013 0 0
September 2013 72,153 0
August 2013 12,000 0
July 2013 0 0
June 2013 31,591 0
May 2013 224,594 0
April 2013 10,016 0
March 2013 0 0
February 2013 64,360 0
January 2013 0 0
Click to enlarge

There have been 1,051,739 shares sold, and there have been zero shares purchased by insiders since January 2013.

Financials

Time Warner Cable reported the full-year 2013 financial results on January 30 with the following highlights:

Revenue $22.1 billion
Net income $2.0 billion
Cash $525 million
Debt $25.1 billion
Click to enlarge

The three insiders sold their shares after these results.

Outlook

Time Warner Cable's 2014 guidance is as follows:

Revenue growth 4%-5%
Adjusted OIBDA growth 5%-6%
CapEx $3.7 billion
Click to enlarge

News

On February 13, Comcast Corporation (NASDAQ:CMCSA) and Time Warner Cable announced that their Boards of Directors had approved a definitive agreement for Time Warner Cable to merge with Comcast.

Competition

Time Warner Cable's competitors include AT&T (NYSE:T) and Verizon Communications (NYSE:VZ). Here is a table comparing these companies.

Company TWC T VZ
Market Cap: 38.05B 182.37B 197.77B
Employees: 51,200 243,360 176,800
Qtrly Rev Growth (yoy): 0.02 0.02 0.03
Revenue: 22.12B 128.75B 120.55B
Gross Margin: 0.53 0.60 0.63
EBITDA: 7.72B 46.73B 48.57B
Operating Margin: 0.21 0.24 0.27
Net Income: 1.94B 18.25B 11.50B
EPS: 6.70 3.39 4.00
P/E: 20.47 10.33 N/A
PEG (5 yr expected): 1.23 2.20 2.37
P/S: 1.70 1.43 1.66
Click to enlarge

Time Warner Cable has the highest P/S ratio among these three companies.

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

Company Insider buying / shares Insider selling / shares
T 0 0
VZ 0 16,517
Click to enlarge

Only Time Warner Cable has seen intensive insider selling during the last 30 days.

Conclusion

There have been three different insiders selling Time Warner Cable, and there have not been any insiders buying Time Warner Cable during the last 30 days. All three of these insiders decreased their holdings by more than 10%. Time Warner Cable has an insider ownership of 0.08%.

Before going short Time Warner Cable, I would like to get a bearish confirmation from the Point & Figure chart. The two main reasons for the proposed short entry are a relatively high P/S ratio, 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.