When a sale's not just a sale, and thereby hangs a tale?

IT'S said by the experts that selling by directors does not really mean anything the proceeds might be needed, say, for a divorce settlement or maybe a new boat.

By InvestSMART · 16 Jul 2011

By InvestSMART ·
16 Jul 2011

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IT'S said by the experts that selling by directors does not really mean anything the proceeds might be needed, say, for a divorce settlement or maybe a new boat.

It's buying transactions that really matter, so they say, as that means only one thing that a director thinks the shares are cheap.

But it's clear that some directors sell shares because they think they are overpriced and sometimes they buy shares just to fly the flag, as in the case of someone who has just joined a board.

Sometimes, directors elaborate on their transactions. How nice it is when they tell the market why they sold, or bought, for that matter.

Take Dr Alan Stein, a geologist who is chairman of Neon Energy, a Perth-based oil and gas explorer with interests in Vietnam and California.

He had an interest in nearly 15 million Neon shares and this week he peeled off 1.5 million of them and sold them at about 46? a share.

The chairman explained that he had sold the shares he collected about $684,000 to pay part of the cost of a family residence. The scrip closed yesterday at 43.5?.

Elsewhere on the real estate front, Simon Farrell, deputy chairman of Coal of Africa, did some selling a few weeks ago.

He explained that the $441,000 or thereabouts that he received from the sale of some shares was to assist with the purchase of a home in London.

Meanwhile, trading by directors was quiet ahead of the profit reporting season. Those doing a bit of buying spent $4.4 million, while those selling collected $4 million, helped along by Territory Resources directors selling into an on-market bid by Jonesville.

There was little activity in industrial stocks. An exception was in CSR. Michael Ihlein joined the board this month, and a few days ago the former Brambles chief opened his account, picking up 50,000 shares at $2.90 apiece.

CSR has been weak in recent days, closing yesterday at $2.69.

George Wang, the executive chairman of MacarthurCook Property Securities Fund, as surely as night follows day, continued buying and now holds 13.9 million units.

Gary Stafford, the managing director of PanAust, which runs a copper-gold mine in Laos, did some mighty profitable option exercising and selling.

He exercised 210,000 options at $1.90 apiece and sold 500,000 shares at $3.98 each. Nice.

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Frequently Asked Questions about this Article…

What does a director selling shares usually mean for everyday investors?

Director share sales can mean many things and don’t always signal trouble — directors often sell to pay for personal expenses like a home, divorce settlement or a boat. The article notes analysts say buying is often a stronger signal because directors tend to buy when they think shares are cheap, but sellers sometimes simply need cash or want to rebalance holdings.

How should I interpret director buying versus selling when assessing a stock?

Insider buying is often seen as a more meaningful endorsement because it suggests confidence in value, while selling can have benign motives. The article highlights both behaviors: buying can indicate belief that shares are undervalued, but selling may reflect personal needs or portfolio moves, so investors should consider explanations and broader company context.

What happened when Neon Energy chairman Dr Alan Stein sold shares?

Dr Alan Stein, Neon Energy’s chairman, sold 1.5 million Neon shares at about 46 cents each and said he raised roughly $684,000 to help pay part of a family residence; the Neon stock closed the next day at about 43.5 cents.

Why did Coal of Africa deputy chairman Simon Farrell sell some of his shares?

Simon Farrell, deputy chairman of Coal of Africa, sold shares and explained he received about $441,000 (or thereabouts) from the sale to assist with the purchase of a home in London — an example of a director selling for a personal real-estate purpose.

What director trading activity was reported ahead of the profit reporting season?

Trading by directors was relatively quiet before reporting season: directors who bought spent about $4.4 million while those selling collected about $4 million, with Territory Resources directors among those selling into an on‑market bid by Jonesville.

What insider buying took place at CSR and who was involved?

Michael Ihlein, who joined CSR’s board this month and is the former Brambles chief, bought 50,000 CSR shares at $2.90 each; the article notes CSR has been weak recently and closed at $2.69.

How much does George Wang hold in MacarthurCook Property Securities Fund?

George Wang, executive chairman of MacarthurCook Property Securities Fund, continued buying and now holds 13.9 million units according to the article.

What option exercising and selling did PanAust’s managing director Gary Stafford do?

Gary Stafford, managing director of PanAust, exercised 210,000 options at $1.90 apiece and sold 500,000 shares at $3.98 each, a transaction the article describes as a profitable set of option exercises and sales.