Insider Buying Alert: CEOs Are Buying These 10 Stocks

Fahad Saleem
8 min read

In This Article:

In this article, we will take a detailed look at Insider Buying Alert: CEOs Are Buying These 10 Stocks. If you want to skip our detailed analysis and see the top 5 stocks in this list, click Insider Buying Alert: CEOs Are Buying These 5 Stocks.

CEOs sitting at the helm of affairs with informational advantage are often tempted to buy or sell shares of their company ahead of events with potential impact on stock prices. CEOs doing illegal forms of insider trading has become common over the past several years.

Examples of CEOs Doing Illegal Forms of Insider Trading From Recent History

Last month, Dutch soccer club AFC Ajax NV suspended its CEO Alex Kroes, saying it found "strong indications" that the executive was involved in insider trading. The club accused Kroes of buying more than 17,000 shares of the club just a week before his appointment.

In March, the SEC alleged in a lawsuit that Andy Bechtolsheim, the billionaire co-founder of Sun Microsystems Inc. and Arista Networks Inc., illegally traded on Cisco's $2.6 billion offer to buy Acacia Communications Inc. as he learned about the deal in advance.

Shadow Trading

Biotech executive Matthew Panuwat was working at biopharma company Medivation back in 2016. He received information that Pfizer was interested in buying his company. Panuwat did something that was new in the insider trading world — instead of buying his own company shares to profit from the Pfizer deal, he bought call options on Medivation rival Incyte Corporation. Panuwat's idea, according to the SEC's lawsuit, was to profit from  Incyte stock gains when the Pfizer-Medivation deal news would become public. That's exactly what happened when Pfizer announced to buy Medivation for $14 billion. Incyte shares jumped and Panuwat pocketed $120,000 in profit. The SEC later won its case as the jury agreed with the body's claims that this kind of insider trading – labeled as shadow trading – is also illegal.

What Can Outsides Learn from Legal Insider Trading Activities of CEOs

But it's not always illegal for CEOs to buy or sell their company shares. In fact, founders and CEOs are often expected by investors to have skin in the game. An executive buying shares of his company is often seen as a positive sign. But what can outsiders learn and gain by paying attention to CEOs buying their own company shares? Can an average investor make money by tracking stocks CEOs are buying? Researchers have pondered over these questions for decades. One of the hottest research topics in the industry is to find out why CEOs often buy so much of their company stock in addition to the equity they already own via stock offerings, compensation, grants and other means.

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