What does it mean when a director sells?

[akumaslair]

can someone tell me the possibilities and reasons to a director selling...

other then the one in a million, personal reasons, spur of the moment and silly reasons....

there is the obvious, the director no longer believes the company is good or longterm a good viability....

do directors with the expectation of an announcement shortly sell to profit take....

what other reasons are there, and to what is the most likely.

I only ask is becuase a share that I have which is expecting a fairly big announcment has released something today that the director has reduced their holdings by approx 35% and therfore the price has gone down a little...

 

[prawn_86]

Re: What does it mean when a director sells

there is no one answer really.

It is pretty much the same as why does any investor sell? A myriad of reasons.

Im pretty sure (but not 100%) directors are not allowed to buy or sell 2 weeks before and after a price sensitive announcement though.

having said that though, sometimes there can be suspicious director activities, especially in small cap stocks

 

[robandcoll]

Re: What does it mean when a director sells

I am assuming you are talking about the MHL directors ofloading 3mill for $171,000. Christmas shopping for the Mrs!!!.

 

[akumaslair]

Re: What does it mean when a director sells

yep you got it,... I just didn't want to turn this thread into a MHL thread....

I just found that a bit strange and was trying to make note of it.

Does that mean no announcement for minimum 2 weeks??

 

[doctorj]

Re: What does it mean when a director sells

I don't think there are formalised restrictions around directors and staff buying or selling either side of announcements beyond normal disclosures and market announcements.

Some companies have corporate governance restrictions that prevent them from transacting outside designated trading windows, but not often in smaller companies.

 

[tech/a]

Re: What does it mean when a director sells

A few years ago I did a lot of work on the theory that director buying indicated strength in a stock and director selling weakness.
Insight Trader had all the stats to play with so off I went.

I found the EXACT inverse.
Directors sell stock normally increases in value.
Directors buy and it tanks.

It was only until reciently I seem to have a bit of an answer for this.(I think).

Generally they are larger amounts.So when selling they are creating supply into periods where generally the stock is at a higher level.Once their supply disappears then buyers again have to chase sellers.
Vice versa for buying at a lower level.
They provide demand but once filled demand goes---stock "Can" tank.

So relax could be a good thing.Watch tommorows trading closely will tell a great deal.

 

[akumaslair]

Re: What does it mean when a director sells

A few years ago I did a lot of work on the theory that director buying indicated strength in a stock and director selling weakness.
Insight Trader had all the stats to play with so off I went.

I found the EXACT inverse.
Directors sell stock normally increases in value.
Directors buy and it tanks.

It was only until reciently I seem to have a bit of an answer for this.(I think).

Generally they are larger amounts.So when selling they are creating supply into periods where generally the stock is at a higher level.Once their supply disappears then buyers again have to chase sellers.
Vice versa for buying at a lower level.
They provide demand but once filled demand goes---stock "Can" tank.

So relax could be a good thing.Watch tommorows trading closely will tell a great deal.

tech/a: when you say 'Directors sell stock normally increases in value.'
I assume you are referring in the long run.... and a short run price reduction....

it could also mean the director thinks the company/stock is a complete dud... right???

 

[doctorj]

Re: What does it mean when a director sells

A few years ago I did a lot of work on the theory that director buying indicated strength in a stock and director selling weakness.

Did you notice if the the size of the director's holding (in % terms) had an impact on whether it was postive or negative?

 

[akumaslair]

Re: What does it mean when a director sells

Im getting a bit confused with the basics.

supposedly I am a director with a fairly substansial holding.... if the other parties agree to do something radical and then I sell out thinking its a bad idea but becuase I got out numbered, does this mean insider trading..

and obviously the oppposite, everyone decides to change the business in a real positive way, eg they say "hey, lets consider buying out company X", and if I buy up big, does this make it insdier trading

 

[doctorj]

Re: What does it mean when a director sells

supposedly I am a director with a fairly substansial holding.... if the other parties agree to do something radical and then I sell out thinking its a bad idea but becuase I got out numbered, does this mean insider trading..

It is if your decision is based upon information or specific details not known to the market.

and obviously the oppposite, everyone decides to change the business in a real positive way, eg they say "hey, lets consider buying out company X", and if I buy up big, does this make it insdier trading

Again, only if your decision is based upon information or specific details not known to the market.

 

[tech/a]

Re: What does it mean when a director sells

Doc.
I never kept the results.
but from memory it didnt seem to matter.
I only looked at those volumes of director sales which were above average.
Like $500K min.
Yes the results were based on longish timeframes but often and it was often the reverse in expected market direction was immediate.


akumaslair
What I found did fly in the face of logic---still does!
Insight trader used to make a big deal about how this was a revolutionary way to find certain home run stocks.
I subscribed for 12 mths in which time I did my study.You had to subsribe to get the past history.
Its no longer run--I know why.

Have a look at company announcements and find director buying and selling---check it out yourself. It doesnt happen all the time but more often than as you would expect.-------Unfortunately.

 

[akumaslair]

Re: What does it mean when a director sells

tech/a: when you say 'Directors sell stock normally increases in value.'
I assume you are referring in the long run.... and a short run price reduction....

it could also mean the director thinks the company/stock is a complete dud... right???

 

[YChromozome]

Re: What does it mean when a director sells

it could also mean the director thinks the company/stock is a complete dud... right???

Normally in this case you get a surprise resignation with an excuse that they want more family time or to pursue other interests

 

[akumaslair]

Re: What does it mean when a director sells

fair enough..

I am just trying to get my head around what tech/a said.. getting a bit confused.

canyou clarify tech/a or anybody..

you said, "a director assuming has a large parcel of shares, will sell up, the market price is already high, so therefore creating lots of supply, of which, you say buyers will consume...... there is a temporary sp drop, with a long term sp increase.....have I interpreted right????? I don;t get why buyers will buy upon seeing directors supposedly "bailing out".

And for the opposite, the director thinks the company is a dud, so if he buys more or a lot, then the supply dries up, the sp rises in the short term, and then when the market realises its dudiness, they start to bail and sp drops in the long run???????

what is the motivation for this, profit taking, or an attempt to manipulate the market, if the company is headed for good news/future, then if the director sells and he has got faith in the future, and the price doesn;t go down, doesn;t this mean he has missed the boat, ie youve made the biggest mistake in your life???

 

[tech/a]

Re: What does it mean when a director sells

Your trying to make logic out of the percieved illogical.
Directors may sell shares from their own company for any number of reasons.
They may have other business interests which they may need to raise capital for.

If it were that logical everytime there was a director buying everyone would be buying and vice versa.
This simply isnt the case.

I can only present my findings not the logic behind it.
Do your own research.

 

[Tysonboss1]

Re: What does it mean when a director sells

I think directors will from time to time sell large parcels of stock,...

especially if a large portion of there wealth is tied up with that company.

 

[akumaslair]

Re: What does it mean when a director sells

ok... fair enough.......

on this forum and other forums,I have been reading..

the stock I am looking at the director who holds a fair share, not too substansial has just sold 35% of his holdings, everyone is saying "dog stock" why on earth would he sell, while a few here have said its a sign of bad news...

now 2 opposite opinions either with merit or volume really confuses me,

its like a 1 or 2 food experts saying if you eat junk food everyday you will get fat, and 99% of the population who have done or are doing it saying that this is not the case.....

 

[tech/a]

Re: What does it mean when a director sells

akumaslair

My answer.

There are those who trade and those who talk about and theorise about trading.
On forums the latter is common.

Put another way.
There are those who understand volume and those who THINK they understand volume.

And another.
Would you honestly put 100k on a stock based upon the ramblings from a forum?
Its your opinion and experience that will determine your success not others.
Go get it!

its like a 1 or 2 food experts saying if you eat junk food everyday you will get fat, and 99% of the population who have done or are doing it saying that this is not the case.....

So if you take the majority opinion you'll get fat.

 

[doctorj]

The other side of the coin is that as much as we'd like to think otherwise, trading (and economics and finance theory) is still more art than science. Disagreement makes a market and this extends from the buy and sell sides of the depth right through to the theory that underpins those decisions. There are few, if any, hard and fast rules or conclusions in this game - financial theory just isn't there yet. We're still at the observational stage of the game, causality is still a ways off.

 

[CFD]

You will always get different opinions. We are not talking about right and wrong here, just different opinions. What is being suggested here is that there are many different reasons why a director would sell (his wife wants to spend it before he makes it, could be another!) and that you or I are unlikely to know the reason, at least not until after the event.

Do not jump to conclusions and give a greater weight of opinion to someone who shares the result of their research.