IPG Photonics: 7 Different Insiders Have Sold Shares During The Last 30 Days

Apr.23.14 | About: IPG Photonics (IPGP)

Summary

Seven insiders sold IPG Photonics stock within one month.

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

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

IPG Photonics Corporation (NASDAQ:IPGP) develops and manufactures fiber lasers, fiber amplifiers, and diode lasers that are used in various applications, primarily in materials processing.

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Insider selling during the last 30 days

Here is a table of IPG Photonics' insider activity during the last 30 days.

Name Title Trade Date Shares Sold Rule 10b5-1 Current Ownership Decrease In Ownership
IP Fibre Devices Ltd 10% Owner April 3-21 56,617 Yes 7,209,385 shares 0.8%
Alexander Ovtchinnikov SVP April 17 6,563 Yes 113,479 shares + 19,687 options 4.7%
Valentin Gapontsev Trust I 10% Owner Mar 25-Apr 17 33,334 Yes 7,821,999 shares 0.4%
Valentin Gapontsev CEO April 3-21 40,000 Yes 515,931 shares 7.2%
Angelo Lopresti SVP April 15 10,000 Yes 50,712 shares + 10,000 options 14.1%
Trevor Ness SVP April 3-14 5,000 Yes 6,890 shares + 17,500 options 17.0%
Timothy Mammen CFO April 14 4,999 Yes 25,468 shares 16.4%
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There have been 156,513 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 IPG Photonics' insider activity by calendar month.

Month Insider selling / shares Insider buying / shares
April 2014 129,846 0
March 2014 120,667 0
February 2014 107,334 0
January 2014 0 0
December 2013 17,750 0
November 2013 27,562 0
October 2013 28,020 0
September 2013 36,815 0
August 2013 13,867 0
July 2013 16,750 0
June 2013 10,750 0
May 2013 6,750 0
April 2013 14,709 0
March 2013 0 0
February 2013 11,983 0
January 2013 21,754 0
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There have been 564,557 shares sold, and there have been zero shares purchased by insiders since January 2013. The month of April 2014 has seen the most insider selling.

Financials

IPG Photonics reported the full-year 2013 financial results on February 14 with the following highlights:

Revenue $648.0 million
Net income $155.8 million
Cash $448.8 million
Debt $16.0 million
Backlog $265.0 million
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The seven insiders sold their shares after these results.

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(Source: Investor presentation)

Outlook

IPG Photonics' guidance for the first quarter of 2014 is as follows:

Revenue $160 million to $175 million
EPS $0.69 to $0.83
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Competition

IPG Photonics' competitors include Coherent (NASDAQ:COHR), Fanuc (OTCPK:FANUY), and Rofin-Sinar Technologies (NASDAQ:RSTI). Here is a table comparing these companies.

Company IPGP COHR FANUY RSTI
Market Cap: 3.78B 1.59B 35.39B 666.32M
Employees: 2,800 2,514 5,261 2,270
Qtrly Rev Growth (yoy): 0.14 0.06 -0.09 -0.15
Revenue: 648.03M 820.48M 5.60B 539.02M
Gross Margin: 0.52 0.39 0.48 0.35
EBITDA: 252.21M 118.96M 2.19B 55.21M
Operating Margin: 0.34 0.10 0.35 0.07
Net Income: 155.78M 63.90M 1.30B 28.07M
EPS: 2.97 2.59 1.11 0.98
P/E: 24.53 24.74 27.20 23.89
PEG (5 yr expected): 0.94 1.47 N/A 2.06
P/S: 5.85 1.92 6.35 1.22
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IPG Photonics has the second-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
COHR 0 17,770
FANUY N/A N/A
RSTI 0 80,000
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Only IPG Photonics has seen intensive insider selling during the last 30 days.

Conclusion

There have been seven different insiders selling IPG Photonics, and there have not been any insiders buying IPG Photonics during the last 30 days. Three of these seven insiders decreased their holdings by more than 10%. IPG Photonics has an insider ownership of 18.05%.

Before going short IPG Photonics, 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.

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