Selling
continues at the online brokers
by Bob Gabele, Managing Editor
Insiders' Chronicle
Dare we say
"trend" in connection with the persistent insider selling
at the online brokerages? In recent months, we have commented
on insider selling at E*Trade Group Inc. (EGRP), Charles Schwab
Corp. (SCH), Ameritrade Holding Corp. (AMTD) and market maker
Knight/Trimmark Group Inc. (NITE). By all appearances, the trade
data from the individual online brokerages (as well as for NITE)
imply a less than overwhelming state of insider confidence for
the stocks going forward. Viewed collectively, the activity may
be even more ominous, suggesting that any perceived downside
threat may be industry-wide (i.e., business model related) rather
than company specific. The stocks in the group certainly share
a similar trading pattern, each having recovered somewhat from
rather severe price declines. Even so, the recoveries have as
yet been only partial, and insiders continue to sell at prices
below each stock's established highs.
In fact, insider sales persisted into year-end
at each broker mentioned above. Perhaps most aggressive were
the insiders at SCH, where six sold a combined 1,196,000 shares
in November. President, Co-CEO, COO David Pottruck, accounted
for 1 million of the totalthis, in addition to the 1.5 million
shares he sold throughout January and August '99 when the stock
traded in the mid $50 range. Needless to say, Pottruck's willingness
to sell again at lower levels does not strike us as particularly
encouraging. Insiders at both AMTD and EGRP likewise continued
to sell at lower prices. For example, EGRP's Thomas Bevilacqua
sold 25,000 shares in November when the stock was trading in
the $30's. Bevilacqua also sold in May when the issue was trading
in the $50s.
In an interesting twist, Ameritrade has adopted
a policy of pre-announcing all sales by company executives, and
to limit executive sales to 5% of their position during any one-year.
Clearly, this level of transparency and sales limitations is
a welcomed development. At the same time, the resulting peer
pressure not to sell AMTD stock may well add weight to their
recent sales.
The Street
remains divided when it comes to the online brokers. Heavy trading
volumes lend credence to the optimist argument that shares of
the online brokers should continue to rebound an argument buoyed
by Schwab's recent positive pre-announcement. Naysayers insist
that increased advertising budgets and a Tech bubble destined
to burst will ultimately threaten the online brokerages. Without
a diversified source of income, online brokerages may find it
hard to compete with full service brokers in an ever-increasing
competitive niche.
Editor's Note: © 2000 First Call
a Thompson Financial Company. Bob Gabele is Managing Editor
of Insiders' Chronicle, 1455 Research Blvd., Rockville,
MD 20850, 1 year, 50 issues, $395. Insiders' Chronicle maintains
the world's largest insider database. The Database Operations
Group enters over 260,000 documents per year, representing 740,000
new securities transactions annually and has in-depth experience
interpreting and extracting information on insider filings. Visit
the Web site at www.cda.com/investnet
