Demandware rockets, chairman pockets – salesforce. com, inc. (nyse_crm) _ seeking alpha

“The prettiest sight in this fine, pretty world is the privileged class enjoying its privileges.” That line from Philadelphia Story (or High Society for the more musically inclined) is also relevant to why following insider data is worthwhile for investors.

When the U.S. Trade reference definition Congress legislated the Securities Exchange Act of 1934 that mandated company executives file stock trades in their own firms with the Securities Exchange Commission (which the Act also birthed), it had no delusions that the mere act of registering their actions would keep insiders from profiting from the unfair advantage they had trading their own shares.

The concept that “sunshine is the best disinfectant” was expected to halt the more blatant illegal insider trading activity execs had practiced leading up to the stock market crash of 1929. Foreign trade regulations definition But the newfangled SEC’s job was not to stop executives from making money trading their own shares. International trade system definition If an insider’s trade filed via a Form 4 at the SEC seemed to cross the line between what was considered legal and illegal insider trading, shareholders had the right (and now the disclosures) to question what the executives knew, and when they knew it.

Smartly, no precise definition of illegal insider trading was penned into the 1934 Act-or ever.


Retail trade industry definition If there was a precise definition, execs would exploit loopholes in the language. Definition of trade or business Instead, it was expected that lawsuits would generate a body of legal precedents that would grow over time, consistent with the ever evolving financial environment. Definition of a trade association And so it has. Definition of fair trade And so it is. Definition for trade Insider trading lawsuits still spark headlines and debate today, over 80 years after the original 1934 Act.

But there is still no fine legal line between legal and illegal insider trading. Skilled trade definition Instead, there remains a large grey area executives trade in that separates easy profits from a potential prison term-or, more commonly, simply disgorging profits back to their firm if it’s determined they overstepped.

The recent example of an insider making a remarkably prescient trade that got us thinking about this grey area again came from Thomas Ebling, Chairman, President, and CEO of DemandWare (NYSE: DWRE). Internal trade definition DemandWare rocketed over 60% in the past week after Salesforce.com (NYSE: CRM) offered to buy the firm at a huge premium. Silver trade definition That’s a nice achievement for any company head. Free trade business definition In Mr. World trade definition Ebling’s case, he also pocketed an additional $1 million plus from a purchase he made just over two months ago.

Now, a million dollar profit for an exec in his own stock isn’t news. The definition of fair trade It happens every day. Triangular trade short definition But looking at just how Mr. Trade supplier definition Ebling managed this casual seven-figure open-market bonus certainly made me go “hmmmm”.

After four years at the helm of DemandWare, Mr. Definition of trade in value Ebling suddenly initiated a 10b5-1 buying program on March 23rd. Trade definition for kids This, after he had been disposing shares consistently over most of his tenure via a 10b5-1 selling program.

During 2015, Mr. Step out trade definition Ebling disposed of 60,000 shares of DWRE via his automatic selling program, with the last sale occurring on August 6, 2015 for $59.33 a share. Trade geography definition That was twice the number of restricted shares he received in 2015 as part of his stock-based compensation plan, meaning he was continuing his behavior of reducing his total holdings of DWRE each year. Travel trade definition Again, nothing odd there.

The fact that Mr. Trade and manufacturing definition Ebling suddenly bought shares in the open market late last March, however, was a stark reversal of behavior. Modern trade definition Even more interesting was that he did so by doing it via a newly established 10b5-1 buying program. Definition of fair trade coffee These are rare, and generate an “AB” transaction code in our insider histories.

10b5-1 programs are overwhelmingly used by executives (often at the urge of their general counsels) to dispose of shares without being accused of selling while in possession of material, non-public information. Cease to trade definition It’s one of those loopholes in regulations that allow insiders to schedule sales during times when trading windows would otherwise be closed to them. On trade marketing definition And they are a dime-a-dozen, illustrated by the commonplace “AS” transaction types in our insider histories.

There are valid reasons insiders set up 10b5-1 trading programs. Definition of foreign trade If a founder has all their net worth tied up in their stock, it may be perfectly logical to trickle out set amounts of the massive holdings at set times during a year without caring at what price their stock is trading for.

But why would Mr. Trade selling definition Ebling need such legal cover when buying shares? He bought DWRE late March for less than $35 a share. International trade organization definition That was a 40% discount from the price he sold his last share at the prior August. Trade economics definition He could have simply bought in the open market without initiating a 10b5-1 program for the logical reason that he believed his stock was way oversold given its fundamental prospects.

To go through the added effort of expressing mere fundamental bullishness via a 10b5-1 program is interesting at the least. Fair trade food definition To heck with the fact that his purchase under the plan was made a mere week before DemandWare’s Q1 was closing-making it silly to argue he did not have a good idea of how his first-quarter conference call would go. Trade enrichment definition The real question that’s begged is whether Mr. Definition of international trade law Ebling made the extra effort because he had a whiff that his firm was a likely takeover target?

If his 10b5-1 buying program specified that he was planning to continue buying shares at set times in the future on a regular basis, well, that’s a good reason to have initiated the plan. Trade finance definition wikipedia But regulations don’t require that insiders make the details of their 10b5-1 plans public, so all investors know is that he managed to pocket over $1 million from one very well-timed trade.

Don’t get us wrong. Butter trade definition We’re not accusing Mr. Regional trade organizations definition Ebling of acting illegally. What is the definition of trade To the contrary, we thank Mr. Fair trade definition Ebling (and insiders everywhere) for playing on the darker side of the vast grey area between legal and illegal insider trading whenever possible. Trade school definition That is why investors should look closer at insider filings than they do now.

Personally, we’re continuing to do research and back testing to incorporate this sort of nuanced trading behavior more strongly in our InsiderBot auto-ratings program, so transaction like Mr. What is international trade definition Ebling’s generate timely investment intelligence instead of merely being an observation in hindsight-as this one admittedly was for us.

So the primary takeaway from interesting behavior like Mr. Definition of international trade Ebing’s is to pay attention to it. Terms of trade definition Insider trading disclosures were mandated precisely so the average investor would have a more level playing field with company executives that can’t help but know more than them about their companies’ prospects. Definition for free trade You can’t know what they know, but you can see what they do. Fair trade definition business Don’t get upset by insiders trading well. Trade index definition Feel empowered by the Form 4s they file.

We supply Seeking Alpha with Daily Round Up articles every day to help highlight when high dollar value insider transactions are also significant. Trade facilities definition For the next week, we’re also posting our more comprehensive new “Daily Reports” via Instablogs. Fair trade economics definition These reports list all the stocks that had insider activity the prior session–with each stock clearly labeled with our proprietary company ratings.

These disclosures should further be made public within the same two-business-day deadline as the trades made under the plans-perhaps as a lengthy footnote or attachment to the electronic Form 4 itself. Modern trade channel definition This would hardly be an extra burden for insiders. Global trade compliance definition 10b5-1 plans are already penned and filed somewhere. Food trade definition Disclosing them would only take a few more clicks of the mouse when a Form 4 is electronically filed at the SEC.

After all, insider filings were mandated specifically to make executives’ transactions in their firms more transparent. Trade balance definition Not having transparency for the parameters of 10b5-1 trades seems obviously to go against the intent of the original legislation, and offers execs a loophole of opaqueness that has undoubtedly been exploited since 10b5-1 programs became de rigueur around 15 years ago.

Certainly Mr. What is the definition of trade winds Ebling would appreciate the opportunity to prove to his investors that they have absolutely no reason to arch their eyebrows at his 10b5-1 purchase in March by making the details of his plan known. Exchange traded funds definition Our only complaint, though, is that we did not read a deeper significance into this trade at the time. International free trade agreement definition And Mr. International trade effect definition Ebling gave everyone more than enough time to follow his lead.

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