Executives’ Sales of Their Own Firms’ Stocks Soar to $4.9 Billion

U.S. executives unloaded $4.9 billion worth of their own companies’ stock in February, the highest level since May 2001, as insiders continued to lock in gains from the market’s sharp rebound of the last year, new data showed.

The sales in February more than quadrupled from the $1.1 billion in insider sales logged in February 2003, according to a survey by Thomson Financial released Tuesday.

In one example, executives at medical device maker St. Jude Medical Inc. sold 446,576 shares for $32.3 million. Chief Executive Terry Shepard sold 187,720 shares worth $13.7 million a few days after the stock hit its highest level in at least seven years.

Historically, large volumes of insider stock sales often have preceded a decline in share prices. The theory is that insiders have the best sense of when their own shares are overvalued.

But the market’s persistent advance since March 2003 has confounded that theory.

“There’s no question that the level of selling is high,” said Lon Gerber, director of insider research for Thomson. “This is my hypothesis, but part of the reason [for heavy insider sales] is that insiders are now more risk-averse, and I think diversification is more desirable” in their personal portfolios.

Executives bought $96 million worth of their own companies’ shares in February, down from $115 million in stock purchased a year earlier. Those numbers count only open-market purchases, not purchases made via stock options.