Summary
Palantir’s key executives have sold approximately $2.3 billion worth of Class A shares since the company’s direct listing in September 2020.
But things are improving and insider selling has drastically waned off in recent months.
Readers and investors may want to accumulate Palantir’s shares on potential price corrections.
Michael Vi/iStock Editorial via Getty Images Palantir (NYSE: PLTR ) seems to be once again surrounded by bearish speculation. Its key executives have sold almost $2.3 billion worth of Class A shares since its direct listing in September 2020 and investors are now questioning the loyalties of these company insiders. While many are fearing that Palantir’s executives are bailing before the ship sinks, others feel that they’re profiting at the expense of shareholders. In this article, I’ll attempt to cover Palantir’s insider sales in detail, discuss why they were elevated in 2021 and why investors shouldn’t be concerned about them in 2022. Let’s take a closer look. Aggressive Insider Sales
Let me start by saying that the SEC mandates company insiders, which includes officers, 10%-plus stockholders and top-level employees, to disclose their trading activity pertaining to their company, through form 4 filings. These personnel tend to have real-time information about their company’s financial and/or operating performance, so the Street monitors their trades to get insights about the concerned company’s upcoming results.
The general perception is that if a company’s prospects are deteriorating, then its insiders would look to exit their positions ahead of a market-wide selloff. Conversely, if a company’s prospects are improving, then these insiders would be privy to such information beforehand and they’d look to increase their holdings in the company instead. The problem here is that this is just an indicator of what the insiders are doing, and isn’t a full-fledged trading strategy on its own.
As far as Palantir is concerned, its insiders have sold 127.1 million shares since September 2020. To put things in perspective, the dollar-value of these share sales amounts to roughly about $2.3 billion, or almost 9% of the company’s entire market capitalization at the time of this writing. Interestingly, the company’s CEO, Alexander Karp, was responsible for the bulk of these share sales (~42%). BusinessQuant.com Given the sheer size of this insider selloff, readers and investors are understandably concerned about investing in Palantir. There’s the obvious concern that, perhaps, Palantir’s key executives aren’t confident in their company’s future prospects which is why they’re actively selling their shares. Then, there’s the secondary concern that continued dumping of shares into the open market will increase the supply of shares and weigh on the stock price.
Here are a few recent comments from readers expressing their concern regarding Palantir’s ramping insider sales. Seeking Alpha Seeking Alpha But as we’ll see in the next section of this article, the worst is behind us and investors need not be concerned about Palantir’s insider sales anymore. No Need to Panic
As I previously stated, the general fear associated with these sales is that Palantir’s insiders are, perhaps, bailing before the ship sinks. But fact of the matter is that its key personnel are still holding on to a significant number of their shares and still have ample skin in the game. The table below highlights that Palantir’s insiders collectively still own about 13.78 million Class A shares in the company. This is in addition to their Class B share holdings and the options that are due for expiration in subsequent years. So, in my opinion, this is one of the many reasons why investors shouldn’t panic. BusinessQuant.com Secondly, the pace of this insider selloff has massively slowed down in recent months. Per our database at Business Quant, Palantir’s insider share sales in Q1 CY22 are down 95% sequentially and down 98% year over year. In fact, Palantir CEO hasn’t sold a single share in the open market in the last 5 months. These data points lead us to conclude that Palantir’s insider sales have waned off considerably of late and aren’t a cause of concern anymore. BusinessQuant.com Another thing worth noting here is that Palantir’s shares have risen 40% from their February-lows. If its key executives did not believe in their company’s growth story, they would’ve opportunistically reduced their holdings on the rally. But as we see in the chart above, insider selling did not pick up in March 2022. This should reassure Palantir’s long-side shareholders that the company’s top brass isn’t looking to jump ship.
Before we move on to the third point, let’s understand why this insider […]
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