Insider selling is not ominous or evil
Shay should have been canned long ago for a lack of common sense
Mr. Shay is an attorney. His job is to tell his client what they are legally allowed to do. He is not paid to make value judgments for his clients. If I was paying a lawyer I’d want him to provide me with all my options and the LEGAL ramifications of them. I’m not going to pay him his hourly rate to tell me how to manage my finances – would you? Nothing about the insider sales indicates any job performance deficiencies.
Why would insiders sell now? To use the funds for living and to diversify. The stock options are part of their compensation. There is no reason for them to not spend their money. Secondly, it is imprudent and very risky to have your investments concentrated in one investment. That is compounded when the investment is also your employment and possibly your retirement fund. Taking money off the table is a conservative and rational thing to do. If IDCC goes to 100 next month, they are all exceptionally wealthy and the “loss” of potential gains will not affect their life at all, except for their estate. However if IDCC goes to 10 and they get laid off the money they left on the table would make a huge difference in how they live. This has nothing to do with IDCC in particular – there is risk in any stock. A disaster wipes out IDCC’s building and staff. A new technology is developed that makes all of IDCC’s IP obsolete. Likelihood is very remote, but looking at the risk/reward it is prudent. Add to that IDCC is trading at an all time high (bubble excluded), seems like a good time to diversify.
Management’s stock is for them to use for their financial benefit. They have no obligation, fiduciary or otherwise, to send signals to the market to benefit the share price. I think that options and stock based compensation is excessive at IDCC and in the corporate world in general, but once they are granted I’m not going to expect it to be managed for my (the shareholder's) benefit.
Will the stock go down following this news? Yup, I think so. Part of it is self fulfilling prophecy. Many people use this as a sell signal. Also on the heals of a run-up with no news, a pull back in price should not be a surprise. This will not affect the long term price, which will be based on results.
