A number of BlackRock, Inc. (NYSE:BLK) insiders offloaded a sizable number of shares during the course of the previous year, which may have alarmed some investors. Knowing whether insiders are buying rather than selling is typically more useful when analysing insider transactions because the latter might be subject to several interpretations. Shareholders should be alerted, though, if several insiders sell shares during a certain period of time, since that may indicate trouble.
Though we would never advise investors to make all of their decisions based on what a company’s directors have been doing, common sense suggests you should take note of whether insiders are purchasing or disposing of shares.
The largest single insider sale in the previous year occurred when Chairman & CEO Laurence Fink sold $30 million worth of shares at a price of US$733 per share. Insider selling is something we usually dislike, but we get more concerned about it the lower the sale price. The fact that this transaction was completed for far more than the share price, which is currently US$598, is somewhat consoling. Therefore, it might not reveal anything about insider confidence at this time.
BlackRock insiders did not purchase any company stock during the previous year. The graphic below shows the insider trades during the previous year.
A common curiosity among investors is the percentage of a firm controlled by insiders. If a sizable portion of the company’s shares are owned by insiders, I believe this to be encouraging. Insiders at BlackRock possess shares valued at around US$849 million, or 1.0% of the firm. This kind of insider ownership is welcomed by most shareholders since it indicates that management’s motivations are in line with those of the other shareholders.
It doesn’t really matter if there haven’t been any insider transactions in the previous three months. While we applaud the high levels of insider ownership, we are unconvinced by the BlackRock insider sales over the past year. If you’re anything like me, you might want to consider if this business will expand or contract.
Insiders are defined in this article as those who disclose their transactions to the appropriate regulatory agency. We do not yet account for derivative transactions or indirect interests; instead, we only record open market transactions and private dispositions of direct interests.