Insider Weekends: Billionaire Investor Ron Perelman Makes A Trio Of Insider Purchases

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Includes: ACN, CHK, CRM, FB, MORN, PAH-OLD, REV, SCHW, SGMS, YEXT
by: Asif Suria
Summary

Insider buying declined sharply last week.

Notable insider buys: SGMS, SCHW, CHK, REV, YEXT.

Notable insider sales: PAH, FB, ACN, MORN, CRM.

Insider buying declined sharply last week with insiders purchasing $57.27 million of stock compared to $209.15 million in the week prior. Selling also declined with insiders selling $246.43 million of stock last week compared to $513.22 million in the week prior.

Sell/Buy Ratio: The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by total insider purchases that week. The adjusted ratio for last week went up to 4.3. In other words, insiders sold more than 4 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 2.45.

Insider Sector Heat Map December 28, 2018 (Source: InsideArbitrage.com database)

Note: As mentioned in the first post in this series, certain industries have their preferred metrics such as same store sales for retailers, funds from operations (FFO) for REITs and revenue per available room (RevPAR) for hotels that provide a better basis for comparison than simple valuation metrics. However metrics like Price/Earnings, Price/Sales and Enterprise Value/EBITDA included below should provide a good starting point for analyzing the majority of stocks.

Notable Insider Buys:

1. Scientific Games Corporation (NASDAQ:SGMS): $17.49

Director Ronald O. Perelman acquired 300,000 shares of this gaming company, paying $16.51 per share for a total amount of $4.95 million. These shares were purchased indirectly by MacAndrews & Forbes Incorporated.

The seventy five year old corporate raider of the 1980s turned philanthropist was active this December making multiple purchases in three stocks including Scientific Games, Revlon (NYSE:REV) and vTv Therapeutics (NASDAQ:VTVT). While Scientific Games and Revlon have market caps of over $1 billion, vTv is a tiny microcap stock, which shot up 120.39% last Friday on volume that was 243 times the volume of shares traded on Thursday. I did not see any other news for vTv and this huge move appears to be on account of Mr. Perelman's purchase through his holding company MacAndrews & Forbes Incorporated. We saw a similar huge move in VTVT in October following Mr. Perelman's purchases but the stock eventually gave back most of those gains.

P/E: N/A Forward P/E: 33.63 Industry P/E: 18.36
P/S: 0.49 Price/Book: N/A EV/EBITDA: 9.75
Market Cap: $1.6B Avg. Daily Volume: 1,975,709 52 Week Range: $14.79 - $62.8

2. The Charles Schwab Corporation (NYSE:SCHW): $41.06

President and CEO Walter W. Bettinger acquired 124,669 shares of this investment brokerage, paying $38.81 per share for a total amount of $4.84 million. Mr. Bettinger increased his stake by 51.52% to 366,672 shares with this purchase.

This purchase caught my eye because we rarely see purchases of Charles Schwab and this purchase was done under a Rule 10b5-1 trading plan adopted by Mr. Bettinger on November 29, 2018. This means we are likely to see additional purchases in the future. The previous insider purchase at Charles Schwab was in November 2017 by Mr. Bettinger. His latest purchases during the current market weakness were more than twice the size of his November 2017 purchase of depository shares. If we exclude depository shares (representing a fraction of preferred shares), we had not seen a single purchase of common shares of Charles Schwab since May 2016.

P/E: 18.74 Forward P/E: 14.26 Industry P/E: 33.26
P/S: 5.71 Price/Book: 3.08 EV/EBITDA: N/A
Market Cap: $55.45B Avg. Daily Volume: 9,048,520 52 Week Range: $37.83 - $60.22

3. Chesapeake Energy Corporation (NYSE:CHK): $2.15

Shares of this oil and natural gas producer were acquired by 3 insiders:

  • Director Archie W. Dunham acquired 2,100,000 shares, paying $1.97 per share for a total amount of $4.13 million. Mr. Dunham increased his stake by 28.98% to 9,347,375 shares with this purchase.
  • Director Thomas L. Ryan acquired 200,000 shares, paying $1.81 per share for a total amount of $361,800. Mr. Ryan increased his stake by 55.02% to 563,519 shares with this purchase.
  • EVP - Operations Jason M. Pigott acquired 11,000 shares, paying $1.93 per share for a total amount of $21,230. Mr. Pigott increased his stake by 1.12% to 995,890 shares with this purchase.

This is the second week in a row we have reported on large insider purchases at Chesapeake. Even as I was thinking about the company in the context of the recent volatility in natural gas prices, I stumbled upon Barry Ritholz's "Masters in Business" interview of Bethany McLean regarding her new book on fracking called Saudi America. The interview and the book touch upon some of the problems and excesses in the fracking industry and specifically discuss Chesapeake. The podcast is well worth a listen and I look forward to reading her short book.

P/E: N/A Forward P/E: 3.12 Industry P/E: 14.33
P/S: 0.28 Price/Book: N/A EV/EBITDA: 6.45
Market Cap: $2.64B Avg. Daily Volume: 37,319,150 52 Week Range: $1.71 - $5.6

4. Revlon, Inc. (REV): $24.67

Director Ronald O. Perelman acquired 60,000 shares of this beauty care products company, paying $23.18 per share for a total amount of $1.39 million.

We have written about Revlon several times in the past including in September 2017 following a $10.85 million purchase by Mr. Perelman when we wrote,

Revlon’s second largest shareholder, Mittleman Brothers, was probably worried about Mr. Perelman taking the company private and wrote this letter to the CEO and the board urging them to obtain a standstill agreement from Mr. Perelman so that he does not increase his stake to 90% and then attempt to take the company private via a short-form merger.

Mr. Perelman responded on September 15th and according to this letter indicated,

MacAndrews & Forbes presently does not intend to increase its beneficial ownership above 89% of the issued and outstanding Revlon Class A Common Stock (“Common Stock”) or to undertake transactions to take Revlon private.

Should MacAndrews & Forbes determine to undertake transactions to increase its beneficial ownership above 89% of the issued and outstanding Common Stock or to take Revlon private, MacAndrews & Forbes agrees to:

(1) notify the Board at least 5 business days in advance of such transactions; and, prior to consummating such transactions,

(2) convene a Board meeting;

(3) support the creation of a special committee of independent directors empowered to select its own advisors; and

(4) negotiate with that special committee regarding the terms of such transactions by MacAndrews & Forbes, in order to promote the interests of all shareholders, including minority shareholders.

The agreement in this paragraph shall terminate on the first anniversary of the date hereof, unless extended in writing by MacAndrews & Forbes prior to such date.

For the avoidance of doubt, this letter should not be construed as an admission by MacAndrews & Forbes that any of the assertions made in the Mittleman Letter have any merit whatsoever.

P/E: N/A Forward P/E: -20.06 Industry P/E: 79.57
P/S: 0.5 Price/Book: N/A EV/EBITDA: 42.64
Market Cap: $1.3B Avg. Daily Volume: 229,817 52 Week Range: $14 - $29.62

5. Yext, Inc. (NYSE:YEXT): $14.61

Director Michael Walrath acquired 100,000 shares of this software company, paying $13.35 per share for a total amount of $1.34 million. Mr. Walrath increased his stake by 788.02% to 112,690 shares with this purchase.

P/E: N/A Forward P/E: -38.45 Industry P/E: 34.47
P/S: 6.92 Price/Book: 20.49 EV/EBITDA: -17.84
Market Cap: $1.47B Avg. Daily Volume: 1,059,598 52 Week Range: $10.58 - $27.19

You can view the full list of purchases from this Insider Buying page.

Notable Insider Sales:

1. Platform Specialty Products Corporation (NYSE:PAH-OLD): $10.2

Director Martin E. Franklin sold 2,419,258 shares of this specialty chemicals company for $9.91, generating $23.97 million from the sale. These shares were sold indirectly by MEF Holdings, LLLP.

P/E: N/A Forward P/E: 13.6 Industry P/E: 22.16
P/S: 0.76 Price/Book: 1.44 EV/EBITDA: 9.81
Market Cap: $2.94B Avg. Daily Volume: 2,489,164 52 Week Range: $9.09 - $13.54

2. Facebook, Inc. (NASDAQ:FB): $133.2

Chief Operating Officer Sheryl Sandberg sold 55,000 shares of Facebook for $132.11, generating $7.27 million from the sale. These shares were sold indirectly through a trust.

P/E: 20.08 Forward P/E: 17.88 Industry P/E: 25.67
P/S: 7.38 Price/Book: 4.76 EV/EBITDA: 12.06
Market Cap: $382.79B Avg. Daily Volume: 26,476,033 52 Week Range: $123.02 - $218.62

3. Accenture plc (NYSE:ACN): $139.82

Shares of Accenture were sold by 3 insiders:

  • Chairman & CEO Pierre Nanterme sold 37,846 shares for $135.16, generating $5.12 million from the sale.
  • Group Chief Exec-Resources Jean-Marc Ollagnier sold 6,165 shares for $135.16, generating $833,249 from the sale.
  • General Counsel and CCO Chad T. Jerdee sold 2,441 shares for $140.00, generating $341,740 from the sale.
P/E: 21.48 Forward P/E: 17.74 Industry P/E: 22.12
P/S: 2.21 Price/Book: 7.05 EV/EBITDA: 12.79
Market Cap: $89.13B Avg. Daily Volume: 2,508,269 52 Week Range: $132.63 - $175.64

4. Morningstar, Inc. (NASDAQ:MORN): $110.11

Executive Chairman Joseph D. Mansueto sold 37,350 shares of Morningstar for $107.82, generating $4,027,146 from the sale.

P/E: 26.39 Forward P/E: 38.77 Industry P/E: 46.82
P/S: 4.7 Price/Book: 5.07 EV/EBITDA: 15.61
Market Cap: $4.7B Avg. Daily Volume: 100,541 52 Week Range: $90 - $144.34

5. salesforce.com, inc. (NYSE:CRM): $134.68

Shares of this software application company were sold by 3 insiders:

  • Chairman of the Board & co-CEO Marc Benioff sold 15,000 shares for $126.27, generating $1.89 million from the sale.
  • President and CFO Mark J. Hawkins sold 9,066 shares for $121.93, generating $1.11 million from the sale. 8,220 of these shares were sold as a result of exercising options immediately prior to the sale.
  • Director John Victor Roos sold 114 shares for $128.80, generating $14,683 from the sale.
P/E: 143.28 Forward P/E: 48.97 Industry P/E: 22.12
P/S: 8.25 Price/Book: 7.01 EV/EBITDA: 83.91
Market Cap: $103.03B Avg. Daily Volume: 7,229,561 52 Week Range: $102.27 - $161.19

You can view the full list of sales from this Insider Sales page.

Disclaimer: Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.

Disclosure: I/we 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. I have no business relationship with any company whose stock is mentioned in this article.