InterDigital Inc (IDCC)

[Danny Detail]

To All .. RE: Insider Selling .. Cause and Effect

I assume most here already recognize and understand what I am about to post regarding insider selling but IMO it is worthwhile repeating given the extent and frequency of insider selling on the part of IDCC insiders. The effect of insider selling on the stock price correlates directly with the interpretation by the company's investors as to the cause for the insider selling. The causes can generally categorized into either personal financial reasons on the part of some or all of the selling insiders and/or a negative view of the company's future prospects, at least in the short term, by some or all of the selling insiders.

IMO, it is very important for each investor to recognize that insider selling per se almost never causes the price to decline. In those instances where the price declines precipitously shortly after the public disclosure of insider selling, it invariably is the selling by investors who have concluded that the insiders have lost faith in the company's future that drives the stock price down. In many instances this decline is exacerbated by short sellers who closely monitor investor reaction to insider selling for the express purpose of making a quick profit.

FWIW, in my experience, insider selling is almost always driven by personal financial issues on the part of insiders, not the least of which is diversification, particularly since the financial disasters that befell many dot com insiders and those employed by companies involved in the recent highly publicized financial scandals. That does not mean that insider selling never foreshadows problems for the company involved, but it does suggest that individual investors should be very careful about concluding that it is a given, as some have suggested here, that significant insider selling means that the company's future prospects have taken a turn for the worse.

As always JMHO,
Danny