What to know about Moderna’s insider sale

It’s no surprise that senior executives and board members sell some of their stock in a company from time to time. Most shareholders don’t regret a modest level of such activity, but when insiders oversell it can cause concern.

Some investors might have such concerns about Modern (ARNM 6.37% ) right now. Biotechnology reported 17 insider selling transactions in August. So far this month, seven insider selling transactions have been reported. This represents an average of nearly one insider sell per trading day over the past six weeks.

Should we be worried? Here are three things you’ll want to know about Moderna’s insider sale.

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1. Who sells

Start at the top. Moderna CEO Stephane Bancel is the biggest-selling of all the company’s executives. During the month of August and so far in September, more than half of the company’s insider selling transactions have been made by Bancel. Two other Moderna executives also made quite a few sales: Moderna president Stephen Hoge and chief medical officer Tal Zaks.

2. Why they sell

Companies do not have to report the reasons for insider selling transactions. However, there are some clues as to why the three Moderna executives are likely selling the biotech stocks.

Several – but not all – of the sells made by Moderna insiders in August and September were related to the exercise of stock options. The company’s president and chief medical officer, in particular, frequently bought stock at low prices through the exercise of stock options and then immediately sold them back at higher prices.

Many of Bancel’s sales involved shares held directly by a trust established for the benefit of his children. These types of trusts are relatively common.

Was there a common denominator for all the sales made by Moderna insiders in August and September? Yes. They were all set up under Rule 10b5-1 trading plans. These trading plans were established by the Securities and Exchange Commission two decades ago. Rule 10b5-1 trading plans allow insiders of the company to buy or sell a predetermined number of shares at a predetermined time. These plans were adopted by the SEC to give company insiders a way to buy and sell stock without violating insider trading rules.

3. How much stock they still have

How many shares Moderna insiders still have is arguably more important than how much they’ve sold. All of the Moderna executives who sold shares still hold similar biotech positions to those they’ve held in the past.

Bancel directly owns nearly 7.8 million shares, roughly in line with the number it owned at the end of July. In addition, Boston Biotech Ventures (a company in which Bancel is the majority shareholder and sole managing member) owns more than 9.1 million shares of Moderna, close to the level held at the end of July.

Hoge directly owns about 1.9 million shares now, nearly the same number of shares he owned at the end of July. Zaks now owns the exact same level of Moderna shares he owned at the end of July – zero. Each time he exercises his stock options, he sells all the shares he acquires through the options.

Carefree

Are any of these insider sales a cause for concern for investors? Not at all.

Moderna’s top executive sales pattern in August and so far in September is basically the same thing that happened earlier this year. While the frequency of trading may seem superficially concerning, all of the activity has little impact on the holdings of top insiders.

More importantly, Bancel and Hoge – Moderna’s two main leaders – still have a lot of skin in the game. Their financial interests are aligned with the interests of shareholders. As long as this is the case, any criticism of insider trading is much ado about nothing.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

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