*why did they sell in the first place if the price is "rediculously low"*
I have held my tongue due to my concern of sounding elitist, but here is one line of reasoning:
Take a look at the net worth of the average person or group doing the selling. They are multibillionaires. I know three such people, and am familiar with numerous others. On average I would guestimate that each spends somewhere in the neighborhood of $20M-$40M a year just to “get buy” (For example, it takes a lot of capital to keep your G-5 flying or 150ft yacht floating). They live on a different level than most reading this. For them selling $10M, $50M, or even $125M does not really amount to much. In fact it may barely show up on their radar screen.
To those reading this that sounds like real money. And gosh, they must be selling for some devious reason (remember ~ don’t trust those money grubbing rich!). But in all reality it is a fraction of their net worth. Also, the reality is that most of these folks have a terrible record of timing. Most do not care about the true value of a $10M-$125M piece of their wealth. For example for someone worth $2B, $10M is merely 0.5% of his or her net worth. So what if the investment is worth three fold higher – it still barely amounts to anything. What if they have this really good deal that will get them a guaranteed rate of return in a short amount of time? What if they are like most individual investors and get tired of looking at a loss on their balance sheet? What if, as in the case of the GX founders, their cost basis is (on average) <$0.125 per share? (By the way, due to special tax treatment they can often redeploy the proceeds without incurring capital gains)
Have any of you reshuffled your portfolio recently thinking that 1% or 3% of some position really should be reallocated? Well that decision is not very different than what most of the insiders at GX have been doing.
We are shaped and attacked by “convention wisdom” and “political correctness”. The former infringes on our independent investment thought while the latter impinges on our ability to feel generally good about wealth (notice my own hesitance at the beginning of this note). Conventional wisdom tells us that under the Regan Administration our great nation went deep into debt. Political correctness tells us that only the rich prospered during this time period. The fact is that debt as a % of wealth DECREASED during the Regan Administration and INCREASED during the Clinton Administration (heck, $5T disappeared last year alone without debt going down hardly at all). These constricting thought processes also hold that if an “evil” insider sells they are trying to screw us to leave our accounts poor. Some have even referenced that insiders at Level3 had these intentions. Hey, if they saw this economic storm forming, I will be the first to introduce them to the Bush Administration as a replacement for ALL the Fed Governors as well as Mr. Greenspan.
I really believe that the recent insider sales are more a case of insiders acting like many investors, but that it is on a much different scale.
WE HAVE NO CONCRETE INFORMATION TO THINK OTHERWISE.
Take care. |
