Insider selling frequently increases in February as many executives elect to hold off on selling late in the year in order to defer taxes on their capital gains until the following year. Also, companies frequently prohibit insiders from selling shares prior to earnings announcements, and most companies report fourth-quarter results in January.
But the doubling of insider selling this February can also be attributed to the robust gains incurred by many technology stocks in late 1999.
To get a glimpse of the dominant role technology insiders played in this selling spree, my company compiled a list of the 20 companies with the highest dollar amount sold for the month.
Eighteen of the 20 firms were Internet or technology-related, with 12 coming from the software industry.
The greatest market value of shares sold at a company in February came from online auctioneer eBay, where eight insiders combined to dispose of over $215 million worth of stock.
The company beat the Street's estimates on Jan. 26, reporting earnings of 4 cents per share while analysts expected 2 cents. Trading at $137 at the time of the announcement, eBay shares jumped to $170 by Feb. 8, when insiders began taking profits.
The profit taking continued through Feb. 18, then stopped when the stock dropped back down to $137. eBay stock subsequently climbed to over $240 by late March, but has since dropped back to about $143.
Twelve insiders sold stock totaling more than $143 million in February at Veritas Software. These insiders took profits while Veritas shares were in the midst of a February surge from $100 to $140.
The company's stock had climbed from the $13 level in early 1999. Shares continued to head north following the disposals to over $160, but have since dropped to their current $100 level.
Also in February, seven Phone.com insiders sold more than $90 million in shares. The distribution occurred as Phone.com shares were climbing from $110 to $140.
The month's disposals were, however, not the largest at the wireless software developer. Five months after the company's June IPO, priced at $8, insiders sold a whopping $141 million in shares while shares were trading at $128.
Considering the incredible run-ups that many technology stocks have had, insider selling was as expected. However, the recent dive in technology stocks now suggests that beyond just pure profit taking, these insiders may have astutely anticipated the sector's correction.