Record Buybacks Lead to Record Disposals

Corporate leaders have conducted insider sales at record levels this year including Elon Musk, Ronald Lauder, Larry Page, Sergey Brin, and Mark Zuckerberg. They all have conducted insider sales in large volumes during the year.

A famous example was Elon Musk who announced on Twitter that he was pulling his stock options from Tesla. According to reports, the Tesla CEO sold shares worth almost $11 billion.

Insider sales are considered a bad sign, since it can be assumed that they, as company directors, have information from inside the company that other shareholders do not have.

Do the corporate leaders probably see something on the horizon?

They have certainly seen that the stock markets are at record levels and are jumping from one high to the next. The first analysts are already talking about the next big stock market crash, which will be the biggest of all time. When the time frame for this will be can only be estimated so far, but seems unrealistic in the near future, because historically seen stock market crashes do not start from bull markets but occur in bear markets.

Another point seems to be hedging before a new tax law threatens to come in some states. Nationwide, the situation also seems murky as the U.S. government has publicly said that “the rich should pay their fair share”.

Sales follow stock buybacks

According to S&P, repurchases totaled $145 billion in the third quarter alone and could go well over $200 billion.

Here, shareholders should take a close look at why companies prefer to buy back their shares instead of investing the money further or paying it out to shareholders in the form of dividends, for example. Of course, shareholders can profit from the possible short-term rises of the shares, but how will this be in the long run if shareholders who are invested in a company then have to reckon with price drops when their company bosses again draw stock options.

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