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Summary

  • Five insiders sold Gain Capital stock within one month.
  • The stock was not purchased by any insiders in the month of intensive selling.
  • All five of these insiders decreased their holdings by more than 10%.

Gain Capital Holdings (NYSE:GCAP) provides trading services and solutions to retail and institutional customers worldwide.

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Insider selling during the last 30 days

Here is a table of Gain Capital's insider activity during the last 30 days.

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Diego RotsztainEVPMar 24-Apr 1770,276Yes99,368 shares + 52,043 options31.7%
Samantha RoadyCMOMar 24-Apr 1642,140Yes80,650 shares + 62,565 options22.7%
Christopher CalhounDirectorApril 18,250Yes4,263 shares + 10,815 options35.4%
Glenn StevensCEOMarch 3184,600Yes670,482 shares11.2%
Jeffrey ScottCOOMarch 2413,750Yes80,850 shares14.5%

There have been 219,016 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 Gain Capital's insider activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
April 2014111,3760
March 2014906,2480
February 2014394,1110
January 2014798,4200
December 201310,7505,000
November 201337,4490
October 2013105,7780
September 201380,4920
August 2013326,7990
July 201354,1490
June 201325,0000
May 20131,847,48613,671
April 201331,250506,616
March 20137,6721,203,502
February 201300
January 201331,2500

There have been 4,768,230 shares sold, and there have been 1,728,789 shares purchased by insiders since January 2013.

Financials

Gain Capital reported the full-year 2013 financial results on February 27 with the following highlights:

Revenue$266.4 million
Net income$31.3 million
Cash$39.9 million
Debt$65.4 million

The five insiders sold their shares after these results.

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(Source: Investor presentation)

Competition

Gain Capital's competitors include FXCM Inc. (NYSE:FXCM). Here is a table comparing these two companies.

CompanyGCAPFXCM
Market Cap:425.06M721.05M
Employees:551874
Qtrly Rev Growth (yoy):1.57-0.02
Revenue:266.4M482.89M
Gross Margin:0.670.76
EBITDA:N/A100.21M
Operating Margin:0.190.12
Net Income:31.3M14.83M
EPS:0.790.44
P/E:13.5835.82
PEG (5 yr expected):0.591.10
P/S:1.601.47

Gain Capital has a higher P/S ratio than FXCM. In FXCM, there have been 1,887,246 shares sold, and there have been 7,500 shares purchased by insiders this year. Only Gain Capital has seen intensive insider selling during the last 30 days.

Conclusion

There have been five different insiders selling Gain Capital, and there have not been any insiders buying Gain Capital during the last 30 days. All five of these insiders decreased their holdings by more than 10%. Gain Capital has an insider ownership of 87.78%.

Gain Capital has a $0.5 price target from the Point & Figure chart. I believe there is an opportunity for a short entry with a $7 price target. I would place a stop loss at $14.47, which is the all-time high. The two main reasons for the proposed short entry are a bearish Point & Figure chart, and the intensive insider-selling activity.

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Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in GCAP over 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.

Source: Gain Capital: 5 Different Insiders Have Sold Shares During The Last 30 Days