Trading by insiders at Orange County companies declined sharply in the first five months as executives and employees chose to wait out depressed share prices on Wall Street.
Total insider trading at OC companies from Jan. 1 to May 15 was down by 68% vs. the same period last year, according to Lancer Analytics Group, a Scottsdale, Ariz.-based research firm that tracks insider trading. OC insider trading fell to $538 million in the period from $1.68 billion a year ago.
The drop “is correlated to the decline in stock market,” said Kevin Schwenger, a research analyst with the Lancer Group, a unit of Thomson Financial.
With the fall in the stock market, “You’ve got decreased trading across the board, including insider selling,” said Kurt Stabel, chief investment officer at Newport Beach-based money management firm Street Asset Management LLC.
The Lancer Group analyzed 122 companies based in Orange County, most of which are included in the three Business Journal stock indexes on pages 14 and 15.
Only 62 of the companies, or about half, saw any insider activity during the period, vs. 96 in the previous period. Insider trading includes buying or selling in companies by individuals closely linked to the company or its management.
Irvine chipmaker Broadcom Corp., for one, had 47 insider sales valued at $982 million in 2000. In 2001, there were only 13 sales valued at $99 million. In both the years, no insider buying was reported at Broadcom.
The falloff in insider selling comes after a drastic collapse in Broadcom’s stock, which is off more than 90% from its peak in 2000. The average price at which insiders sold Broadcom shares in 2000 was $153. In 2001, the average selling price fell to $81.
Broadcom co-chairman Henry Samueli and his family trust together sold $398 million worth of stock in Broadcom in 2000. In 2001, Samueli sold $37 million worth of Broadcom shares.
Chief Executive Henry Nicholas and his trust sold $457 million in Broadcom shares last year. This year, Nicholas unloaded $42 million in stock.
“Most of these guys are so wealthy that they don’t need to sell their shares if they feel their stock is low,” Stabel said.
In 2001, no insider selling or buying took place in shares of Newport Beach-based chipmaker Conexant Systems Inc. Last year, the company had 17 insider sales valued at $86 million. Close to a million shares were sold at an average price of around $86 a share.
Dwight Decker, Conexant’s chief executive, sold shares worth $15.5 million last year. The company’s chief financial officer, Balakrishnan Iyer, sold $13.2 million worth of Conexant shares in 2000. Ashwin Rangan, the chief technical officer, sold 30,000 shares last year valued at $2.5 million.
At the current stock prices, “A lot of options are under water and there is no value in it,” Stabel said.
Surprisingly, Aliso Viejo-based buy.com Inc., whose stock trades in pennies, saw a few insider sales this year. Founder Scott Blum, who doesn’t work for the company but still is its largest individual shareholder, sold 1.1 million buy.com shares valued at around $600,000.
Anaheim-based DDi Corp., a contract electronics manufacturer, saw $104 million worth of insider trades in 10 transactions this year. The company went public a year ago.
Companies whose stock prices held up in the bear market had a steady volume in insider trading.
Irvine-based drug maker Allergan Inc. had 10 transactions last year valued at $22 million. While the number of Allergan transactions dropped to eight this year, the value of the sales held relatively steady at $18 million.
Last year, Allergan Chief Executive David Pyott sold $6 million of his holding in the company. Pyott refrained from any selling this year.
With almost a 100% jump in its stock price, Lake Forest-based Cooper Cos. saw a three-fold increase in insider sales activity. The value of insider trades at the healthcare products company was slightly more than $12 million this year, vs. to $3.7 million last year.
Santa Ana-based Corinthian Colleges Inc.’s insider trades were up 3,500% as executives and others close to the company sold $70 million worth of shares. Last year, insiders sold around $2 million in shares of the for-profit college operator. Corinthian’s shares are up almost 400% from their 52-week low. n
