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NewsmakersApril 21, 2022

Slowdown Time: Corporate Insiders Dial Back Sales—and Buys

Activity in company stocks was high last year but ebbed in 2022’s first quarter, says Verity. Could be a bullish sign.

By Larry Light

Tracking what corporate officers and other insiders do with their company shares has long been an obsession of some stock pickers. Are the insiders selling? That might be a signal of something on the way, good or bad.

In the blah opening act of 2022, though, insiders aren’t doing much selling, or buying, of their own stock, according to research firm Verity. The S&P 500 index is down 6.4% this year, amid worries about rising interest rates, rampant inflation, and the Ukraine war.

The number of insiders who sold stock was at the lowest level since 2018’s fourth quarter, when equities displayed a similar negative bent (the index was down 4.6% for the year).

To Ben Silverman, Verity’s director of research, the current situation is a bullish sign. “It means insiders are willing to wait for valuations to recover before selling again but they’re too cautious to buy en masse right now,” he writes in a report.

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In Silverman’s view, “Insiders are inherently sellers thanks to stock-based compensation, so when they stop generating liquidity it’s a sign that they’re not comfortable with current valuations and prefer to wait out for higher prices.”

A lot of their stock came to these executives as part of their pay packets, as grants or via stock options. Hence any market downshifts are paper losses.

“That ‘free’ and cheap stock means insiders have a lot less risk than other market participants,” Silverman writes, “so a significant decrease in selling is a good indicator they think stocks are oversold.”

Last year, when stock returns soared (up 29%), insider sales were robust. Verity finds that among the biggest sellers were Elon Musk at Tesla, Jeff Bezos at Amazon, and Mark Zuckerberg at Meta, formerly Facebook.

One thing is for sure: these corporate honchos often know what they’re doing when it comes time to take profits. “There is significant academic research that suggests corporate insiders outperform the market when buying shares in their own companies,” writes Fintel, another research firm that follows insider moves.

Net-Zero Pledges Aren’t as Green as You Think, Says New Study

Of the 25 asset managers studied that were members of the Net Zero Asset Manager Initiative, not a single one required companies in their portfolios to stop developing new projects with coal, gas, and oil.

By Anna Gordon

Net-zero pledges have been dominating the world of corporate social responsibility. Over 100 companies with large carbon footprints have signed pledges to commit to net-zero emissions by 2050, according to Climate Action 100+. Investors have looked to these pledges as a source of proof that their engagement strategies are working. Asset managers have also taken the plunge, with 236 managers signing on to the Net Zero Asset Managers initiative, accounting for $57.5 trillion in assets under management.

But a new analysis by Reclaim Finance and three partner NGOs has revealed that despite the promises, many asset managers are not requiring companies to stop developing new coal, gas, and oil projects.

Reclaim Finance created a scorecard system to rank 30 different asset managers based on their climate friendliness. Twenty-five of these managers were members of the Net Zero Asset Managers initiative.

“Leading asset managers are kicking the can down the road without even asking companies to stop worsening the climate crisis,” said Lara Cuvelier, a campaigner at Reclaim Finance, in the press release. “Let’s be clear: drilling a new oil well or opening a new coal mine is not a normal thing to do in a widespread climate catastrophe.”

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The report claims that net-zero criteria is often very vague and leaves room for exclusions and exceptions. While seven of the studied companies do restrict investments in companies that are engaging in new coal projects, three of those companies have created exceptions for this policy.

“Asset managers are not engaging companies on the key climate issues when it comes to limiting global warming to 1.5°C,” said Cuvelier. “Asset managers that provide fresh cash to companies that are ignoring climate science are purely and simply pouring more fuel in the fire.”