I have written about trends in insider selling several times over the years. In my experience, individual insiders sell stock for a few common reasons:
- When a restricted period lifts and they are finally able to, they commonly sell to lower company specific risk as a percentage of their net worth. Restricted periods can be nerve racking, as insiders have limited windows to work with and this can leave them uncomfortably locked in and exposed to bad market moves.
- To raise cash to fund their typically huge spending habits (building mammoth dream homes being one popular item). Cash in hand has great appeal.
- When they didn’t sell in the last downturn, lost heavily and promised their spouse they would never let that happen again.
- Because they are getting older and realize they only have so many business cycles left in order to “get out and get liquid”
- When they see uncomfortable risk of downside in their business model, sector and/or the global economy and fear their stock prices are at unsustainable prices in the circumstances.
When insiders as a group sell in volume at the same time, it tends to be for the last reason above. It is then that insider selling can offer a warning shot about future risk for ‘outsiders’.
Meanwhile many are now selling their Euro-based holdings for similar reasons. See: Investors Prep for Euro Collapse.