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Alan Brochstein, CFA
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Alan Brochstein, CFA has worked in the securities industry since 1986, primarily with the responsibility for managing investments in institutional environments until he founded AB Analytical Services in 2007 in order to provide independent research and consulting to registered investment... More
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  • Vringo Insider Sales On 10/15 (Reported 10/17) 9 comments
    Oct 18, 2012 9:29 AM | about stocks: VRNG

    Many insiders at VRNG have established trading plans to partially liquidate their holdings. Here is a complete list by officer or director of transactions reported 10/17:

    • CFO Ellen Cohl: Sold 1346 at 4.46 (and exercised options at .01). Her holdings are now 35K only plus the 100k unvested stock that they gave her in July
    • CEO Andrew Perl: Sold 4K at 4.625 (and exercised options at 0.96). His holdings are now at 741666, including 88K left of the options he exercised. Not sure if this includes his stock grant from this summer.
    • Seth Siegel sold 2421 at 4.367 and now holds almost 386K
    • John Engelman sold 1173 at 4.65 and now holds 265K
    • Andrew Lang sold 14558 at 4.655 and holds >5.7mm shares
    • Alex Berger sold 8828 at 4.6578 and now holds >2.5mm shares (675K is unvested restricted stock)

    While these sales aren't particularly material in terms of size and are in accordance with previously detailed plans, I don't think that they help the cause by cashing out at all. From a forward-looking perspective, investors in VRNG should keep in mind that win or lose, these guys have a lot of low cost (or free) stock that they can sell in the future. There have been no insider purchases with their own money from what I have seen.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: VRNG
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Comments (9)
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  • Arvidos
    , contributor
    Comments (112) | Send Message
     
    Compared to their total holdings, these numbers are absolutely minimal.
    But the question, did they sell these amounts on a regular basis or was this the first time?
    That info I miss in your article.
    Because if they periodically sell off some minor amount, then there is no issue whatsoever.
    Also, if they doubt the outcome of the trial, why not sell much more?
    So what conclusion is to make of this?
    18 Oct 2012, 10:42 AM Reply Like
  • Alan Brochstein, CFA
    , contributor
    Comments (7528) | Send Message
     
    Author’s reply » They made more substantial sales a few weeks ago. You are right, in and of itself, these sales are minimal. It strikes me as odd that that they started selling in advance of the trial, perhaps a signal of limited confidence in the long-term prospects of the company. My main point is that insiders are in at very low prices (as low as .01 or even zero on some recent very large equity grants). If VRNG loses, I would expect over time that these guys will be standing in line with other speculators to dump the stock. With that said, maybe they win. If they win, you can be assured that they will be selling stock (it's already in their plans).

     

    So, thanks for the question. This information may explain the weakness today. I don't think that one can attach too much importance to these small sales in and of themselves, but investors/speculators should know that their hard cash is up against very low (or no) cost basis in size.
    18 Oct 2012, 10:53 AM Reply Like
  • sonicthoughts
    , contributor
    Comments (218) | Send Message
     
    If you were in their shoes and didn't sell pre-trial you would be a hopeless fool. Of course they want to take a little off the table. There are no certainties -no matter how optimistic they are - and this is the prudent thing to do. Not everyone - even with an excellent hand - likes to go "all in" at the poker table.
    18 Oct 2012, 11:06 AM Reply Like
  • Alan Brochstein, CFA
    , contributor
    Comments (7528) | Send Message
     
    Author’s reply » OK. Maybe you are right, but they were given tons of stock recently. It ends up looking like cash compensation to me when they get stock and sell almost simultaneously. It also looks kind of strange to be tapping institutions for $45mm (after I think $30mm earlier this summer) and then hitting the bid. From an investors standpoint, there is a huge build-up in potential supply. Again, none of the insiders has ever bought a single share of stock (from what I can tell) - so "taking a little off the table" is a funny concept to me.

     

    I have no idea if VRNG will win (trial or settlement) or how much (best guess is that they can pull $100-200mm out, but it's pure speculation), but I can assure you that the upside has been hyped beyond reason. There are several very rational folks (who I believe are long or just sharing their view) who have said the stock is worth no more than $12 with a $500mm victory. In the very short-term, I would expect a spike followed by a flood of selling. On the other hand, a loss leads to most likely $1 or so. If the odds are 50-50 (are they?), maybe now is a good time to buy for high-risk gamblers (a fair bet) - not my call. I have shared many views, but I have never said buy or don't buy.
    18 Oct 2012, 11:15 AM Reply Like
  • sonicthoughts
    , contributor
    Comments (218) | Send Message
     
    Agreed - However the point of your article is about insider selling. you are not hyping and it is certainly not a positive, but if its not material, why even write the article?
    18 Oct 2012, 12:34 PM Reply Like
  • Alan Brochstein, CFA
    , contributor
    Comments (7528) | Send Message
     
    Author’s reply » I am very interested in the whole VRNG story for a number of reasons, sonicthoughts. You may not be familiar with me, but I write about a lot of things. While these sales by themselves aren't material, I think it's important that anyone invested in VRNG be aware of risks. The whole ownership structure is a yellow (not red) flag, and these pre-planned sales are part of that story.
    18 Oct 2012, 12:40 PM Reply Like
  • Not Rich
    , contributor
    Comments (14) | Send Message
     
    Excellent work Alan. I am on the fence about going "all in" on VRNG since I am long, but there lies the rub, do the facts outweigh the speculations?..."Did you know that Whitney Houston's debut LP, called simply Whitney Houston had 4 number one singles on it?"
    18 Oct 2012, 05:40 PM Reply Like
  • RacerX1225
    , contributor
    Comments (125) | Send Message
     
    Insiders sell for any reason but they only buy for one reason, the stock is cheap. It is weird that they are all selling. Individuals selling for individual reasons is one thing but to see all of them selling is unsettling.
    23 Oct 2012, 01:51 PM Reply Like
  • Modernist
    , contributor
    Comments (2110) | Send Message
     
    Insider transactions matter a lot more with small companies.
    27 Oct 2012, 02:58 PM Reply Like
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