Google Insider Trading
The SEC's history of Google insider trading is eye-opening stuff, particularly when it was revealed that 12% of California's tax receipt growth came from the sale of Google shares by insiders. A recent Digg story raised the question of whether the insiders know something about the future of the stock price (e.g., it will drop once click fraud is acknowledged as a major problem) that outsiders don't. I don't believe there's a risk. I just finished reading this paper, which looked at the correlation between insider trading and stock price and found that:
Stock sales by insiders increase three to nine quarters prior to a break in a string of consecutive increases in quarterly earnings. Insider stock sales are greater for growth firms, before a longer period of declining earnings, and when the earnings decline the break is greater. Consistent with avoiding an established legal jeopardy, there is little abnormal selling in the two quarters immediately prior to the break.
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A small 3 bedroom one and a half bath bungalow on a quiet street in San Mateo sold after one week on the market for $1.4 million. Last week. No housing bubble bursting in this neighborhood. Perhaps the insider selling is just some of the Google employees who can now afford to buy a house deciding that they should go ahead an do it... When I worked for a big company and had a lot of stock options, that is why I sold. People outside Silicon Valley don't realize how ridiculously expensive it is to buy even a modest family home here.
There's typically a lot of emphasis put on insider trades and at least in my trading experience, it doesn't really mean all that much. It certainly is interesting to look at, though.
For example, take a look at the millions and millions of MSFT shares that Bill Gates has sold over the last few months.
You know, if I could predict ANYTHING that was goin to happen 9 to 27 months in the future, I'd go into the prediction business.
Do you think that perhaps the limitations on selling insider stock expired sometime near when the transactions occurred and that maybe the insider just wanted something a little less risky than stock?
Perhaps Mr. O'Reilly needs some radar repair on this on.
Hi, DaveL. Thanks for your comment. Two points: (1) I wrote this piece, not Tim ("Mr O'Reilly"); and (2) the paper referenced studied a large number of insider sales and stock drops. I recommend you check out the paper, it's very readable and you'll be able to make more informed criticism once you have done so.
Cheers!
--Nat
I am looking for a reliable and accurate site to enter a stock symbol and view insider buys and sells.
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panasianbiz [05.23.06 06:06 AM]
At this point, I think it's too early in the game to really be able to get a line on what the insider stock selling at Google will ultimately mean for investors. That being said, I tend to agree with you and think that there's nothing significant to worry about in the long run.