Insider Buys May Send The Wrong Signals

by: Edgar Ambartsoumian

There is a notion that when insiders are buying their company stock, then it is often viewed as a positive sign, since executives and directors have knowledge of exclusive information. While this is true, there are numerous other reasons why insiders accumulate or sell shares.

Let us look at the first company on the chart Agenus Inc. (NASDAQ: AGEN), and its CEO’s desperate move to avoid de-listing of the company's stock from NASDAQ. Armen Garo, CEO of Agenus, Incorporated has used its final lifeline as he added another batch of 2,150,980 shares to the 5,329,940 shares that he currently owns, possibly to create support for the stock’s continuous downfall. Company received a letter from NASDAQ’s de-listing qualification staff, giving Agenus until August 30th, 2011 to bring the stock price back to $1.00 a share.

Insider Activity
Company Insider(s) Transacion Share Amount Total Proceeds
Agenus (AGEN) Armen Garo H, CEO Purchase 2,150,980 $1,097,000
Carbonite (CARB) Keenan Andrew, CFO; Krasnow Todd, Vazirani Pravin, executives, and others Purchase 997,000 $9,997,000
Oasis Petroleum (OAS) Collins Ted Jr. Purchase 25,000 $659,500
Acura Pharmaceutical (ACUR) Jones Robert B. Purchase 3,000 $9,703.5

Another notable insiders purchase was in Carbonite Inc. (NASDAQ: CARB) of nearly million shares among multiple executives listed in the aforementioned chart. This optical technology company has sold $100 million worth of common stock in a recent IPO to keep up with the increased demand of bandwidth heavy services, such as video streaming and cloud based computing. The initial public offering was pushed back on August 11th due to the recent volatility, but was finalized on the 16th of August.

Oasis Petroleum’s (NYSE: OAS) Director Collins Ted Jr. scooped up 25,000 shares himself at a total amount of $659,500, adding to his presently stockpile of 78,250 shares. Interesting how CEO's purchase came right after the upgrade by UBS, very interesting!

And lastly I’d like to mention the success of the partnership between Acura Pharmaceuticals Inc. (NASDAQ: ACUR) and Pfizer Inc. (NYSE: PFE) after the FDA approval in June paved the way for the distribution of the drug Oxecta oxycodone painkillers. John Roberts, an executive, has been incrementally loading up shares at an average price of $3.23. Keep your eyes on this one.

It is always helpful to analyze a company by keeping tabs on the insider activity. As stated previously, the motive for insider purchases could range from wanting to prop up a stock price, injecting liquidity or avoiding a de-listing. Insider sales can occur because of the simple fact that an executive wants to pay for his daughter’s expensive college education or is leaving the company, not necessarily that the company's forward year outlook is gloomy. For short-term traders, keeping a close eye on insider trades and analyst upgrades may yield solid opportunities.

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