What to make of Pfizer, Moderna insiders dumping stock?

By: Jayson Derrick
Jayson Derrick
Jayson lives in Montreal with his wife and daughter, loves watching hockey, and is on a lifelong quest to… read more.
on Feb 18, 2021
  • Insiders at Pfizer, Moderna, and other COVID-19 vaccine makers were sellers of their company's stock.
  • Moderna executives sold $321 million worth of shares while Pfizer CEO Bourla sold 60% of his stake.
  • Experts agree there isn't anything illegal with this action.

Insiders at Pfizer Inc. (NYSE: PFE) and Moderna Inc (NASDAQ: MRNA) and other COVID-19 vaccine makers collectively sold nearly half a billion dollars worth of their stock but one pro isn’t alarmed by the trend, The Wall Street Journal reported.

What are insider trades?

Whenever a high-ranking executive at a public company buys or sells their company’s stock, the transaction has to be reported to the public. There is nothing illegal or nefarious about these purchases, provided the action wasn’t based on information or knowledge not known to the public.

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Insiders, much like ordinary investors, typically buy stock when they believe the shares are undervalued and they want to convey confidence to the investment community. On the other side, an executive could be looking to sell some stock to buy property or for any other personal reason.

Moderna executives the most active

Insiders at COVID-19 vaccine makers sold more than 8.5 million shares of their company’s stock in 2020, according to WSJ. By comparison, insiders at the same companies sold 4.7 million shares in 2019.

Moderna insiders were the most active in selling their stock. Executives and one director sold more than $321 million worth of shares in more than 700 transactions. As a reminder, Moderna’s vaccine was calculated as being 94% effective against the virus.

Insiders at Pfizer sold just $12.8 million shares — around half of which were CEO Albert Bourla who sold approximately 60% of his shares on the exact same day it announced positive results from its vaccine.

Pfizer defended the trade, noting the insider sale was authorized in February 2020 and renewed in August. Nevertheless, the activity has raised eyebrows at government agencies in late 2020. Securities and Exchange Commission Jay Clayton said new restrictions on trading should be put in place.

It remains to be seen if any changes are on the table as part of the Biden administration.

Expert: Nothing unusual with insider selling

Corporate compensation pros argue insider sales are consistent with compensation packages relying more on the stock. After all, a rising stock value means insiders and shareholders see gains, although not to the same extent as millionaire insiders.

Much like investors, company executives don’t like to leave profit on the table.

Ben Silverman, director of research at InsiderScore, told WSJ that he would “expect to see” health care executives selling shares. IT isn’t unusual, especially at younger companies like Moderna where executives have a chance to reward themselves personally from the rising stock value.

“As an investor, what you want to look out for is that opportunistic behavior where people are targeting specific prices, increasing the pace of selling at a higher price or these examples where there are significant changes in behavior,” he said.

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