PURCHASING AT STRENGTHS, SELLING AT LOWS TELL TALES
by Bob Gabele CDA/Investnet
Nov 12 1997 3:02AM CST, Richmond Times-Dispatch
When looking at insider activity, it is important to keep in mind what prices executives are paying for shares or at what prices they are willing to part with them.
Purchases into strength, or conversely, sales while the stock is trading well below former highs, can be very telling about how the insiders view the future performance of their shares. This week we have included one company where insiders are purchasing at higher prices, and two companies involved in the computer networking sector whose insiders are selling at seemingly low prices.
Iridium World Communications (ticker symbol IRIDF) is the public investment vehicle for Iridium LLC, which is developing a global, mobile, satellite-based wireless communications network. As of this writing, one-half of the planned 66 satellites are in orbit and the company plans to have 44 in place by the end of the year. Obviously, ventures as aggressive as this contain more than their share of risk, not limited to the likes of a recent satellite failure.
Insiders at the company, however, seem to be assessing the risk picture positively, as they are adding to their positions at prices much higher than the $20 initial public offering price where many of them bought.
Four picked up a total of 15,645 shares in August and September at prices of $31 to $41 each. Three of the four had bought in the IPO as well and are investing more dollars at these higher prices than they were willing to do initially.
Director Richard L. Lesher bought 3,500 shares in August for $36.38 each, investing $127,330. He had committed only $50,000 in the IPO.
Officer Mark Gercenstin bought 1,770 shares for $31 each, investing $54,870. His IPO investment totaled only $30,000. The buying may be subtle, but the fact that these insiders are paying the higher prices is a significant event to us.
We doubt we would see this kind of action if development plans were falling significantly behind schedule.
You may recall that we had been sharply focused on insider selling in Ascend Communications (ASND) shares through 1996 and early 1997 as the stock worked its way to all-time high ground on a wave of Wall Street optimism for companies involved with computer networking.
To say that the enthusiasm has been significantly diminished through the latter part of this year is somewhat of an understatement. Despite the low prices Ascend shares are fetching in the marketplace these days, insiders let stock go in October. During the month, seven of them filed their intentions to sell 424,924 shares as prices declined into the low $30s.
The majority of the sellers were not from Cascade, which was acquired by Ascend during the year. The largest seller was chief financial officer Robert Dahl, who filed his intent to exercise options for and sell 169,703 shares. This trade would serve to reduce his actionable holdings by about 20 percent.
Michael Hendren, senior vice president of North American sales, filed his intent to sell 88,541 shares. This trade would reduce his actionable holdings by about 19 percent. Also announcing their intention to sell were CEO Morteza Ejabat (15,000 shares), and senior vice president of internattional sales Sales Curtis Sanford (15,000 shares). The three remaining sellers, officer Daniel Smith (100,000 shares) and former vice presidents Gururaj Deshpande and Michael Champa received their shares in the Cascade acquisition.
This selling at low prices seems to imply that the insiders involved are not waiting for a rebound. There have been recent takeover rumors surrounding Ascend. This evidence of insider selling tends to contradict those rumors.
Shares of 3Com (COMS) have come under pressure lately, as some negative press about the company's acquisition of US Robotics has surfaced, along with questions about the company's ability to compete with Cisco. While many analysts view the recent weakness in the shares as a buying opportunity, interested parties should consider that executives were aggressively selling stock before the decline in price. These sales were being completed well off the late '96 highs at the $80 level, as the shares rebounded from their April lows at the $25 level.
Sixteen executives sold or filed to sell 3.08 million shares from Aug. 7 to Oct. 14 at $50.25 to $55.49 each. The activity breaks down as six former US Robotics executives (who now are 3Com execs) selling or filing to dispose of 2.66 million shares, while 10 3Com insiders sold or filed to dispose of 419,540 shares.
It should be noted that this round of sales alone will potentially reduce nearly 15 percent from the entire number of shares owned by all 28 directors and filing executives at 3Com.
Here are some trades of local interest:
BASSETT FURNITURE INDUSTRIES INC.
* J.E. Bassett, vice president, acquired by gift 343 shares of common at an unreported price on Oct. 1 and now directly holds 42,537 common.
* John E. Bassett, a director, sold 2,000 shares of common at $28.25 each on Oct. 20 and now directly and indirectly holds 24,879 shares of common.
DUPONT CO.
* Edgar S. Woolard, chairman, sold 2,000 shares of common at $63.25 each on Sept. 10. Woolard indirectly sold 500 shares of common at $63 each on Sept. 9 and now directly and indirectly holds 361,703 shares of common.
* Gary W. Edwards, vice president, disposed of by gift 316 shares of common at an unreported price on Sept. 15-18 and sold 5,000 shares at $62.63 each on the same days and now directly holds 23,431 shares of common.
GANNETT CO.
Willie Curtis Riddle, divisional officer, exercised an option for 1,600 shares of common at $42.38 each on Sept. 25 and sold them at $106.00 each on the same day and now directly and indirectly holds 6,840 shares of common.
(Copyright 1997)
|
