Some posters here are trying to claim that the BOD's sale of 13 million shares to the Germans (for nearly A$4 million) wasn't a big deal, they are in the "
nothing to see here" camp. But if you do a reasonable amount of DD, its clear that the consensus is that such actions should be closely srutinised. Here's a piece from the SMH from 6 years ago (my highlight in yellow):
disallowed/business/beware-of-executives-selling-shares-20171120-gzp0p6.html"The big red flag: beware of executives selling shares
UpdatedNovember 21, 2017 — 5.45amfirst publishedat12.00am
There are many red flags to provide warnings when buying shares but one that even the most unsophisticated investor can watch out for is a company's directors or senior management selling shares.
They are the real insiders.
There is a close correlation between those at the top of a company selling stock and subsequent underperformance of the share price.
Some handy research by stockbroking firm Wilsons found that in 2016, of the companies whose management sold large parcels of shares, 76 per cent of them underperformed the market after the sale. On average their share prices fell by a massive 14 per cent.
Who better than those running a company to know its prospects and when the share price is fully or even overvalued.
Equally who better to know if the company has positive prospects and it's a good time to buy additional shares.
However the author of the Wilsons research Nathan Szeitli said the correlation between an executive buying and the gain in share price was not nearly as strong.
The good news is that directors/senior executives are obliged to inform disallowed when they buy or sell shares and by issuing a 3Y notice. So it's a bit of corporate intelligence that any investor can tap into.
Savvy investors keep a very close monitor on when director/executives sell shares in the companies that employ them.
Wilson Asset Management's Chris Stott noted that "Because of their unique position, when they (directors or executives) sell, it can be tantamount to a vote of no-confidence in the business. As such, we are generally sceptical when directors sell, as it can signal a negative outlook for the company. This is particularly the case when a director substantially reduces their holding, or more than one board member sells simultaneously, or within a short time frame."
Szeitli found that selling from directors didn't have as big an effect on share price movements as selling from the chief executive or finance director.
Another indicator is the size of the parcel sold. The more shares sold by an executive the more likely the price was to fall.
"Based on these findings we would highlight the value of staying abreast of any cash ordinary transactions (especially sales) from management greater than $50k in value," the Wilsons note concluded.
In an update on executive and director share selling which is soon to be released, Szeitli found a lesser incidence this year, which he believes reflects a recognition from executives of the fallout from 2016.
There were a number of extreme cases in 2016 – the largest of which was Brambles then-chief executive, Tom Gorman who caused a stir when he sold his entire stake in the company for between $12.79 and $12.97 following a positive update on its prospects while delivering the full-year result.
The company affirmed the guidance a few months later and again in November that year.
But in January and February 2017 it issued two profit downgrades and the share price tanked. It's trading today at $9.78.
Since then there has been talk of a class action being mounted against Brambles alleging that shareholders were not kept informed – although it is understood there is no reference to Gorman selling his stock.
He announced his retirement in August last year and left in February.
And then there was Vita Group founder Maxine Horne who cashed in 30 percent of her stake when the stock was trading at an all time high of $5.35 in September last year. A few months later things started to go pear-shaped with a Telstra contract and earnings took a $25 million negative hit. Vita shares now trade at $1.14.
For the now-former chief executive of Sirtex, Gilman Wong, the outcome of the decision to sell $2 million worth of stock ahead of a profit downgrade has been particularly dire.
The Australian Securities and Investments Commission (ASIC) is nowinvestigating Mr Wong's share tradesat the time as possible insider trading.
Mr Wong has denied any wrongdoing. However, he was sacked as a consequence of the trading.
And the company is also facing a class action around lack of disclosure.
Having said all this, executives sometimes just sell because they need the money.
Buying property or settling a divorce are two examples of instances where executives just need to raise cash.
Unfortunately investors are not privy to the personal financial circumstances of management."
All IMHO, DYOR
