Corporate Insider Sold Record Levels of Shares in 2021

As new data from the Securities and Exchange Commission (SEC) filing show, stock valuations soared to record highs, causing some of the world’s most famous companies to record $ 69 billion this year. Sold the stock of.

According to the latest numbers from InsiderScore / Verity CNBCSales from the CEO, founders, and company insiders increased 30% from last year to $ 69 billion. This is also an increase of 79% compared to the 10-year average.

Experts said the numbers are usually expected to swell in December, as it is a lively month before the tax season.

Most of the sales are concentrated in a small number of individuals, and Ben Silverman, Head of Research at InsiderScore / Verity, describes the top four companies as “super sellers.”

Tesla Motors CEO Elon Musk was at the top of the list for $ 10 billion. Former Amazon President and CEO Jeff Bezos has invested $ 9.97 billion. The Waltons cashed $ 6.18 billion in Wal-Mart shares in 2021. Facebook CEO Mark Zuckerberg has liquidated $ 4.47 billion.

Other celebrities were also on the list. Google founders Larry Page and Sergey Brin have each sold about $ 1.5 billion in Alphabet shares. Microsoft CEO Satya Nadella has disposed of nearly half of the company’s stock for about $ 285 million.

“The rise in the dollar value of insider sales in 2021 can be attributed to multiple factors, primarily due to historically high stock valuations,” Silberman said. “The presence of a’super seller’during the period helped boost sales. “

Do investors need to worry?

Do retailers and institutional investors need to worry if the leadership of a listed company is selling stock?

Some market analysts may consider selling the cause of concern to insiders, which may depend on how executives and board members liquidate their assets.

In this case, most of the sales were part of a pre-scheduled sales plan, also known as 10b5-1.

In 1934, the SEC enacted Rule 10b5. This makes it illegal to be fraudulent or misleading when trading on US exchanges. It was also created to limit the buying and selling of shares of insider information that is not open to the public.

The SEC made adjustments in 2000. 10b5-1.. Regulators have allowed insiders to come up with trading strategies prior to trading if they have put together a particular date or price to trade.

Last summer, SEC Chairman Gary Gensler said the regulator update rule. Gensler has asked staff to investigate restrictions on when and how these plans will be canceled, share buyback reforms, and restrictions on the number of 10b5-1 plans.

The overall purpose of this measure is to increase transparency and reduce misunderstandings of insider activity. Investors can also know what to expect and when to expect huge equity transactions.

For example, the Waltons regularly sell their shares to fund philanthropy and maintain a certain level of ownership. Bezos, Brin, Page, and Zuckerberg have all completed these transactions as part of the 10b5-1 program.

According to Silberman, some people choose to reduce their holdings for tax purposes.

At the federal level, lawmakers are considering an additional 5% tax on income above $ 10 million and an 8% tax on income above $ 25 million.

Underfunded states are also preparing to impose or raise a series of taxes to generate income.

according to statement From Microsoft, Nadella made a sale for “personal financial planning and reasons for diversification.” Nadella is projected to save up to $ 20 million as Washington is set to impose a 7% tax on capital gains of $ 250,000 or more on January 1.

Industry experts also argue that some CEOs, especially those who collect small salaries, may want to sell their shares and keep their earnings in their pockets. Top leaders may also want to buy large assets or use their funds to diversify their portfolio.

Is it true that many people see the letters on the wall?

Is there a correction?

More and more investors are hoping for a stock market fix as the Federal Reserve shrinks its $ 120 billion monthly quantitative easing (QE) program during the pandemic era and could raise interest rates next summer. I am.

In October, Bankrate released the results of a poll of market experts, revealing that more than half of respondents expect a double-digit decline in financial markets.

A man walking by the New York Stock Exchange (NYSE) in New York City, USA on August 24, 2015. (Spencer Platt / Getty Images)

According to that Third Quarter Market Mavens Survey, 53% of analysts believe that stock prices will be “corrected” by more than 10% from highs. One-third of those surveyed believe that corrections are delayed and may be made at any time over the next six months.

But no one knows when a market fix will occur, says Patrick J. O’Hare, chief market analyst at Briefing.com.

“No one knows the truth,” he said. “Given that there was no 5% drawdown for more than 200 days, it’s not easy to think that the market is going to pull back some notes, although many individual stocks have already been” corrected “. The answer to when the S & P 500 will be revised could depend on rising interest rates and falling megacap shares. “

That said, one of Wall Street’s biggest long-term bulls, Reuthold Group Jim Paulsen, agree Financial markets added that “correction was delayed” and “acquired correction”.

How big can the pullback be in 2022? Paulsen thinks as much as 15 percent.

Whenever that happens, the catalyst for a sharp decline can be accompanied by a series of factors such as large leverage, excessive debt, unexpected news, or punch bowl removal.