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Open Market Insider Buys

02:16 29-Mar-22

The impact of OMIBs (Open Market Insider Buys) are indicated by a P transaction code in SEC Form 4 and can range from none to very impactful.  There are many factors to consider:

• position of the seller: Owners of more than 10% of shares are considered insiders, but they have very different motivations and knowledge than management.
• percentage change in holding: share and dollar amounts often seem large, but can still be meaningless to C-suite types.  Calculating the percentage change in holdings can be useful.
  
• short position in the broader market: OMIBs often have an outsized effect on stocks with high shorted float.  Unfortunately public data on that always weeks behind.  Rebate rate can sometimes be a better indicator.

By contrast true insider sales are typically meaningless.  Most management accrues a preponderance of stock as compensation and they often sell it to pay taxes on that compensation.  Furthermore, it's simply good diversification practice periodically alleviate an over-concentration in any investment.

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