Capital Markets

Report: CEOs Dumping Company Shares

Insiders reportedly sold $8.4 billion in shares last month — and bought just $133 million.
Stephen TaubDecember 6, 2006

Top executives seem to have grown bearish concerning their own companies’ shares. Last month, stock sales by chief executive officers exceeded purchases by the widest margin since 1987, according to an analysis of insider trades by Bloomberg.

Insiders sold $8.4 billion in shares last month and bought nearly $133 million, for a sell-buy ratio of 63.18, according to the wire service, which cited data compiled from SEC filings by the Washington Service. The sellers include such high-profile executives as Microsoft Corp.’s Bill Gates, Google Inc.’s Eric Schmidt, and Kohl’s Corp.’s William Kellogg.

Bloomberg also pointed out that, in terms of the overall level of insider-selling, November was the fifth-highest-selling month since 1987. How good a predictor of the state of the overall stock market is insider sales? Selling peaked at $13.9 billion in March 2000, when the S&P 500 reached its all-time high. The index then fell 5.2 percent over the ensuing two months, the news service added.

Executives sell for a variety of reasons, including diversifying their overall portfolios, raising funds to make significant purchases, or paying taxes on gains from other sales. “Selling shouldn’t be viewed as an indicator of their confidence in the company,” Microsoft spokesman Lou Gellos told Bloomberg. “I can’t comment on the reasons for them selling at this point, but I know Mr. Gates has a very organized program,” he said.