By Brandon Matthews
The question must now be asked. When are insider sales considered a buy signal? If you asked me this question yesterday, my immediate response would be a firm “NEVER!” Today however, that position has changed. As ridiculous as this statement must seem, I ask that you continue to read.
In May of this year, Sirius XM awarded shares of stock to its executives in lieu of cash bonuses. All of the appropriate filings were made with the Securities & Exchange Commission (SEC). It was also announced in the filings that the shares would vest in 20 separate tranches and the bonus shares would be sold as they vested. Many considered this to be a wise move by the company to keep large numbers of shares from being dumped on the market and create the wrong impression. I’m sure many can recall the blazing speed in which Howard Stern sold his shares many years ago. By establishing this vesting schedule, the company is better able to award its employees while doing the least amount of damage to current shareholders by not creating an unnecessary panic. In most if not all of these cases in fact, these same insiders continue to hold much larger positions than the awarded shares represent.
We have been tracking these sales on the Satwaves Forums. Shares that were scheduled to vest on May 20, June 4 and June 18,2009 did in fact vest and were sold into the market. Again the proper documentation was filed with the SEC. Up until then, everything was as it should have been.
Of course this is Sirius XM Radio we are talking about, and even this most simple task of scheduled stock vesting and insider sales could not go a full month without drama. As you may have guessed by now, the most recent vesting and insider sales date of July 08,2009, tranche number 4 in the series, has come and gone without a filing. I’ll grant you that at this time it could merely be an oversight on the company’s part, but that’s just not my style. The previous filings clearly state the intent of these insiders:
What we seem to have here is a case of insiders deciding that now is not a good time to sell, which to me is akin to insiders buying the stock outright. It signals to me that these same insiders believe that there may be more upside potential in waiting. Waiting for what is the question we need to be asking ourselves. We have been witness to many positives coming from Sirius XM Radio this past quarter. The company launched its hugely popular iPhone and iPod Touch app. Might Sirius XM be ready to report an earnings beat? How about an outright profit for the second quarter? Might a deal of some kind be in the works?
The only thing I can be sure of is that if insiders have decided not to sell preplanned stock sales at this time, that I should think long and hard before selling myself. The next tranche is scheduled to vest on July 22.
Position: Long SIRI
Very interesting. I sure hope for ONCE we are not reading anything into this. Heaven knows we’ve waited this long….surely we can wait until August 6th(Q2) information.
A profitable quarter is sure a possibility. We had 0.01 loss in Q1 against 0.08 pennies the quarter before(Excluding the one time 0.07 loss attributed to Liberty deal). We all know Q1 was THE WORST quarter for the economy in general and the company in particular. With BK sword hanging, we could not expect new subscribers to come running to buy life-time subscriptions.
If we had 0.01 loss in Q1, we can very well be profitable in Q2. A lot of new subscribers may have subscribed after learning it was coming on iPhone. A lot of existing subs may have dropped their plans to cancel after learning of an impending iPhone app.
What I find interesting and supportive of Brandon’s article is
“Shares that were scheduled to vest on May 20, June 4 and June 18,2009 did in fact vest and were sold into the market”
Quite possibly those who sold on these dates in May and June did not know that the company was going to be profitable in Q2… But the first missed date is 07/08 and we can very well expect that by 07/08 a lot of insiders knew what happened in Q2..Hence their decision not to sell..
Disclaimer: I love to dream..day dream …
We should see what happens on 7/22 and 8/5…Q2 on 8/6.
On the other hand, They could just be holding to sell into the pre CC run-up.. 7/22 and 8/5 will be very important.
I agree that this is quite interetesting. And if there’s anything to it, then I think it signals a big move for the SP. It doesn’t seem that the insiders would go to this trouble for a possible few pennies per share.
keep in mind, it could in fact be just an oversight. I can ‘t stress this enough. Based on 10b5 plans, it is unlikely that the trades would not have been executed unless it the plan was cancelled…
Brandon,
You need to also keep in mind that the vesting can be accelerated…and they may have sold shares already that were associated with the July 8th tranche at an earlier date.
I have had stock options from an employer and when my shares vested I did not sell them into the market right away. What I can’t seem to believe is that every single share that vested on May 20, June 4 and June 18,2009 were entirely sold to the market. Wouldn’t the chances that every employee decided to sell be quite rare that it would not happen 3 times in a row? What am I missing or what is wrong with the numbers here?
@Mike
Think I might have found my own answer after reading the forum, it appears that not many people were actually involved in these trades, so the probability is much more realistic.
I disagree as the 2nd Q is historically the worst for Sirius and it seems like it will be for subs–The economy HASNY bottomed..Its not in a free-fall but with unemployment still rising and housing still decreasing, we havent hit the low–The markets jump last month was a headfake—Go ask your friends who own businesses if things have gotten better–I DO think the 3rdQ looks better for Sirius as The OEMS are out of BK and are producing more autos to fill up low inventories plus some other areas Sirius is hitting for the 3rd—@nd going to be bad but 3rd will surprise
Something is brewing perhaps the merger of Apple or Microsoft with Siri is the answer.
ESL
ESL,
I hope you are right but if something is brewing why is the stock going down?
I think everyone is missing the point. Think long term here SIRI has one of the biggest market caps in it’s sector. I hate to say it, but the sector itself is damn near dead. As the smaller companies sink SIRI should grow, but that is only with the right leadership in place. SIRI could become one of the biggest communication companies in the world just now by it’s size. yet do they have the guts, and insight?
I will be honest I don’t know I like SIRI, hate the numbers will I make a profit on it yes, because I came in so damn cheap.. but do I believe in them is what I ask myself at night Many years ago Apple was in the low teens and now look at.