Last year, Mark Zuckerberg sold just under 29 million Facebook shares and netted more than $5.3 billion. Mark Zuckerberg sold 1.6 million shares of Facebook for almost $300 million in August, bringing his total this year to 2.9 million shares, netting $526 million.
There are a lot of things to keep in mind when it comes to insiders, particularly CEOs, selling shares of their company. There can be many reasons for sales, not all of them secret or sinister.
In the case of Facebook founder and CEO Mark Zuckerberg, he still owns some 375 million Facebook shares. That means he is sold just under 8 percent of his total holdings in the past 18 months.
Mark Zuckerberg has a philanthropic organization known as the Chan Zuckerberg Initiative, and he has exhibited a pattern of selling shares on a regular basis in order to help fund that organization.
The Chan Zuckerberg Initiative provides funding and education and science, as well as criminal justice reform, immigration reform, and housing affordability.
So not only have his sales fit this unremarkable pattern, but Mark Zuckerberg has a 10b5-1 plan in place with the Securities and Exchange Commission. This plan allows insiders to sell a specific amount of stock at regular periods of time.
That’s exactly the thing that shareholders should always be aware of when they see insider sales, rather than jumping to a conclusion that the CEO has somehow lost faith in the company.
Ed Butowsky, Managing Partner at Chapwood Capital Investment Management, tells CCN:
“The most common reason for insiders to sell shares of stock has been to diversify their own financial holdings. As much as an insider may believe in the future success of their company, nobody wants to have all of their eggs in one basket. Any number of things could befall a company or stock that an insider may not have any knowledge of, or never see coming.”
Consequently, Butowsky says, they are just as entitled as anyone else to diversify their own investments for their own protection.
This contrasts with other types of insider sales.
Shareholders should be vigilant when insiders sell large chunks of their holdings over a relatively short period of time, particularly when things at a company seem like they are going just fine.
Another great example of an insider sale that should make investors worried was the recent secondary offering from Beyond Meat.
In that case, rather than issue brand-new shares from the company treasury to raise money for Beyond Meat, insiders sold their own shares to the public.
Given how high Beyond Meat stock had soared, this was a frightening revelation that these insiders do not believe Beyond Meat stock would ever go higher than it had been trading at.