Few CEOs are as influential as JPMorgan Chase’s (NYSE:JPM) chief executive Jamie Dimon. Thus, when Jamie Dimon announces he’s selling his JPM stock in large quantities, many investors’ ears perk up at this news.
To be fair, Dimon had already put forward a plan to sell up to 1 million shares of the more than 8 million shares he and his family own in the megabank last October. Accordingly, the recent news that Dimon just sold around $150 million worth of JPM stock shouldn’t come as a surprise. And there may yet be more selling to come.
Now, $150 million is a lot of money, and even for a company that’s worth around $500 billion, it’s a sale that’s likely to move the sentiment needle (if not the stock price needle) for some investors. Insider selling activity can be viewed as a negative catalyst, with management losing faith in the ability of their holdings to continue to rise at the same rate in the future. And given the fact that this is Dimon’s first sale in 18 years, there’s reason for such skepticism.
Let’s dive into whether such a view is warranted or not.
JPM Stock Moves Higher, Despite Insider Selling Reports
It’s worth noting that JPM stock is actually on the move higher today, up around 0.6% and trading near its all-time highs. Thus, the market doesn’t seem to think there’s anything to see here.
There’s precedent for that. In some regards, insider selling activity may be less correlated to stock price moves than insider buying activity. That’s because any CEO can sell stock options that they received for basically nothing for any variety of reasons. Maybe they want to diversify their holdings into other stocks, want another vacation home, or simply need that super yacht. There are many reasons to sell, and most don’t have much to do with where a given CEO sees their company headed.
However, insider buying activity often signals extreme belief in the upward trajectory of a company over a period of time. When I see a CEO buying shares of their own stock (especially if it’s heavy buying), that’s a strong signal something may be coming. Insider trading isn’t legal, but buying shares of the company one runs (so long as it’s properly disclosed) is certainly legal. That’s what makes these filings so interesting to watch.
It’s worth noting that Dimon is reaching retirement age, and successor discussions have already come up. Accordingly, one of the key theses around these sales is that Dimon is looking toward the sunset of his career and stepping away from the game altogether. Thus, this transaction, viewed in this light, makes complete sense.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
