Much ado has been made about Hewlett-Packard (HPQ) Director Ralph V. Whitworth's recent "insider stock purchases" made between May 25th and June 4th and filed on May 30th and June 4th. They were a total of 18,200,000 shares purchased at an average of $22 and change. Pretty impressive right? Definitely sending a strong buy signal right? Well, maybe and maybe not. Don't get to carried away by the headlines until you read the Form 4's and do a little other research.
If you read the Form 4's they all contain the following verbiage for each reported purchase. The only difference is the share numbers from the individual filings:
- Mr Whitworth is a Principal of RILLC. RILLC is the record owner of 200shares and sole general partner, or sole managing member of the general partner, of Relational Investors L.P., Relational Fund Partners, L.P., Relational Coast Partners, L.P., RH Fund 1, L.P., RH Fund 6, L.P., Relational Investors VIII, L.P., Relational Investors IX, L.P., Relational Investors, XV, L.P., Relational Investors XVI, L.P., Relational Investors XX, L.P., Relational Investors XXIII, L.P. and Relational Investors Alpha Fund I, L.P. Following the purchase on 05/25/12, these limited partnerships owned a total of 14,414,349 shares. An additional 5,913,065 shares were held in accounts managed by RILLC. Mr. Whitworth disclaims beneficial ownership of these securities except to the extent of his pecuniary interest therein.
So don't get too excited over the purchases as the shares were purchased for a number of Relational Investors' assorted hedge funds. Yes, it's an insider buy and I'm not saying that it isn't a good purchase. It probably is and I'm sure Relational Investors will make quite a profit on their shares. However, it isn't quite the same as a company officer making a large open market insider buy with his or her own money.
I would just caution investors to not weight this event too heavily into a personal investing decision as to weather or not to buy Hewlett-Packard stock. There is also another reason why I mention this.
From a November 17th, 2011 press release from Hewlett-Packard:
"HP today announced that Ralph V. Whitworth, co-founder of Relational Investors LLC, will join the HP board of directors, effective immediately."
"The appointment expands the number of board members by one to 14. Whitworth will join two board committees, the Finance and Investment Committee and the HR and Compensation Committee."
"We believe that Ralph will bring a constructive voice and a track record of value creation into the boardroom," said Ray Lane, HP's executive chairman of the board. "We look forward to benefitting from his perspective and experience."
"I am pleased to join the HP board at this important time," said Whitworth. "HP has an extraordinarily valuable global franchise, and I look forward to working closely with my fellow directors and HP's management team to build shareholder value for the future."
"HP and Relational have entered into a letter agreement under which Relational will support the HP board, and the board will nominate and support Whitworth, for the next two years, as long as Relational continues to be a significant stockholder of HP. A copy of the agreement is included as an exhibit to a Current Report on Form 8-K filed by HP today with the Securities and Exchange Commission."
As you can see, there is a nice symbiotic relationship going on between Mr. Whitworth / Relational Investors and Hewlett-Packard. So, in regard to these recent insider purchases, be sure not to read more into them than might actually be there. If you're going to invest in Hewlett-Packard be sure to consider and evaluate their future business prospects and not weight this too heavily in your decision.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: I am long AAPL, INTC, UNXL, MVIS and MDU.