The Message in Bezos’ and Zuckerberg’s Stock Sales

With the S&P 500 near all-time highs, insider share sales have picked up at top-performing companies. This quarter alone, Jeff Bezos sold about $9 billion in Inc. stock and Mark Zuckerberg’s net sales of Meta Platforms Inc. amounted to around $850 million. While some observers view these developments ominously, I see them as a sign of a healthy mid-cycle market with some room to run.

Let’s start with the big picture. Among the closely watched Magnificent Seven growth stocks, net sales by insiders are at their highest since late 2021. But many insiders stopped selling entirely from mid-2022 through late 2023, and it’s natural to expect some catch-up to address executives’ desire for liquidity and portfolio diversification.

Uptick in Insider Sales

Traders have tried to extract signals from insider transactions for decades. In theory, insiders know more about their businesses than the general investing public, and academics have found ample evidence that their unique insights help insiders to consistently beat the market.

While criminal insider trading looms largest in our collective imaginations (i.e. share sales by Enron Corp.’s Chief Executive Officer Jeffrey K. Skilling), insiders can also trade on squishier, not-quite-prosecutable foreknowledge (“business seems to be going pretty well and markets are assigning a low multiple to my stock, so I’ll opportunistically buy some more of it”). University of Michigan finance professor H. Nejat Seyhun has even made the case that regular investors can sometimes exploit the transactions for their own benefit.

In reality, public disclosures about insider activity are hardly a straightforward tell, and sales volumes are only foreboding if they’re extreme. In addition to not wanting to go to jail, most executives want to avoid even the perception of mistreating minority shareholders by selling their stock at market tops. Doing so can incur reputational damage that hurts their net wealth more in the long term.