Insider Sentiment Flags for Sixth Month in Row

"U.S. stocks have been on sale of late, but corporate insiders aren't finding many bargains.

Insider sentiment, measured by the trailing three-month average ratio of companies whose executives or directors have been buying stock versus selling, has dropped for six consecutive months, according to data from InsiderSentiment.com. That is the longest such decline in almost two years.

Insiders typically have greater insight on the business outlook, and the fact that they haven't been scooping up their own stocks as the market tumbles suggests they believe that it might not have bottomed just yet. The S&P 500 has fallen 18% in the past year and last set a record a year ago.

Corporate insiders tend to time their transactions well, researchers say. They binged on shares of their own companies as markets sold off at the onset of the pandemic in March 2020 and were rewarded with a furious rally over the rest of that year. And they sold en masse in November 2021 when Federal Reserve Chairman Jerome Powell indicated the central bank would soon begin raising interest rates and technology and other growth stocks hit a peak.

Last year, the ratio of insider buying to selling inched up in June when stocks hit their summer lows but has been trending downward ever since. If insiders remain on the sidelines, that could portend more trouble ahead for the stock market, strategists say.

"The thing that stands out right now is the lack of buying even though prices have come down so much," said Nejat Seyhun, a finance professor at the University of Michigan who studies corporate-insider activity. "That's kind of a warning."

Tesla Inc. Chief Executive Elon Musk was by far the most prolific seller among insiders last year. His Tesla share sales totaled almost $23 billion -- according to the Washington Service, a firm that provides insider-trading data and analysis -- as he raised cash to help finance his $44 billion acquisition of Twitter Inc.

Mr. Musk pledged in December to pause his sales of Tesla shares for at least 18 to 24 months, to ease investor concerns that his purchase was to the detriment of car maker. In the three weeks since Mr. Musk's most recent share sales, which concluded Dec. 14, Tesla shares are down 28%. They declined 65% in 2022.

Other notable sales by insiders included those by billionaire Walmart Inc. heir Rob Walton, whose sales were made through the Walton Family Holdings Trust; former Constellation Brands Inc. Chief Executive Rob Sands; Airbnb Inc. co-founder Joe Gebbia and Alphabet Inc. co-founders Larry Page and Sergey Brin, according to the Washington Service. All sold at least $895 million in stock over the course of 2022.

The largest seller among other CEOs was Gary Rollins of pest-control firm Rollins Inc. Mr. Rollins, who stepped down at year-end, sold $506 million in shares over the course of a year when his company's stock greatly outperformed the S&P 500, rising 10%. Moderna Inc. CEO Stephane Bancel followed, with $504 million of sales. Moderna shares dropped 29% last year.

Dustin Moskovitz, co-founder and CEO of software developer Asana Inc., bucked the trend, leading all insider buyers with $921 million in purchases over the course of the year. Mr. Moskovitz said on a September earnings call that he was investing in Asana because he believes "the market opportunity is enormous" for the company's work productivity software.

Among the few sectors seeing increased insider buying activity are the small-cap healthcare, industrials and consumer-staples groups, according to InsiderSentiment.com's analysis. Those segments are traditionally considered defensive sectors that can hold up in a recession.

Many insider sales are made on predetermined schedules to avoid the appearance of impropriety, and insider selling typically dwarfs buying because many executives are compensated with equity in their companies. Still, the comparative lack of buying right now stands out, strategists say, especially as traditional valuation measures show U.S. stocks getting cheaper.

The S&P 500 trades around 17.9 times earnings over the past 12 months, according to FactSet. That is down from a multiple of 25 a year ago and the five-year average of about 23.

In both November and December, shares of almost twice as many companies were sold by insiders as were bought, in line with the average since 2017, according to data from the Washington Service. October, on the other hand, was an outlier: Insiders sold shares in 601 companies and bought shares in just 219.

Insider selling over those three months totaled $17.1 billion, compared with purchases of $1.3 billion. Analysts tend to look more closely at the number of buyers and sellers than dollar amounts to deduce sentiment trends, because a few large sellers can have an outsize impact.

The forces keeping insiders from buying now are likely similar to what is keeping any other investors out of the market, said Mark Hamilton, chief investment officer at Hirtle, Callaghan & Co.

Many investors are hesitant to call a market bottom while the Federal Reserve continues raising interest rates to cool a hot economy. Like many corporate insiders, institutional investors have largely bailed on stocks and turned to more-defensive investments.

"Sentiment generally is negative, and insiders are no less subject to that," Mr. Hamilton said. "People have suffered losses, and the natural psychology kicks in that makes them reluctant to buy when the news is bad and prices have gotten cheap."" [1]

1. Insider Sentiment Flags for Sixth Month in Row
Pitcher, Jack.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 06 Jan 2023: B.1.

Dirbtinio intelekto (AI) startuolis OpenAI siekia 29 milijardus dolerių vertės

   „OpenAI, tyrimų laboratorija, kurianti virusinį ChatGPT pokalbių robotą, derasi dėl esamų akcijų pardavimo pagal konkurso pasiūlymą, kuris, pasak žmonių, susipažinusių su šiuo klausimu, įvertintų įmonę maždaug 29 mlrd. dolerių popieriuje, nepaisant nedidelių pajamų.

 

     Rizikos kapitalo įmonės „Thrive Capital“ ir „Founders Fund“ derasi dėl akcijų pirkimo, sakė žmonės. Pasak jų, konkurse gali būti parduota mažiausiai 300 mln. dolerių OpenAI akcijų. Pasak žmonių, sandoris sudarytas, kaip oficialus pasiūlymas, investuotojams perkant akcijas iš esamų akcininkų, tokių, kaip darbuotojai.

 

     Naujasis sandoris apytiksliai padvigubins OpenAI vertinimą, palyginti su ankstesniu konkurso pasiūlymu, kuris buvo baigtas 2021 m., kai OpenAI buvo įvertinta maždaug 14 mlrd. dolerių, pranešė „The Wall Street Journal“.

 

     „OpenAI“ uždirbo dešimtis milijonų dolerių pajamų, iš dalies pardavusi savo AI programinę įrangą kūrėjams, tačiau kai kurie investuotojai išreiškė skeptišką nuomonę, kad bendrovė gali gauti reikšmingų pajamų iš šios technologijos.

 

     Joks galutinis susitarimas nepasiektas ir sąlygos gali keistis, sakė žmonės. OpenAI atsisakė komentuoti.

 

     Praėjusiais metais „OpenAI“ išleido dirbtinio intelekto produktų seriją, kuri patraukė visuomenės dėmesį, įskaitant vaizdų generavimo programą „Dall-E 2“ ir pokalbių robotą „ChatGPT“.

 

     Jei konkursas bus baigtas tokiu vertinimu, OpenAI būtų vienas iš nedaugelio pradedančiųjų įmonių, galinčių pritraukti pinigų už aukštesnį vertinimą privačioje rinkoje, kur investuotojai atsitraukė nuo naujų sandorių, atsižvelgiant į praėjusių metų technologijų kelią.

 

     „Microsoft Corp.“ taip pat vedė derybas, kad padidintų savo investicijas į „OpenAI“, pranešė žurnalas. 2019 m. „Microsoft“ investavo 1 mlrd. dolerių į „OpenAI“ ir tapo jos pageidaujamu partneriu komercializuojant naujas technologijas tokioms paslaugoms, kaip paieškos variklis „Bing“ ir dizaino programa „Microsoft Design“.

 

     „OpenAI“, vadovaujama technologijų investuotojo Samo Altmano, buvo įkurta 2015 m., kaip ne pelno siekianti dirbtinio intelekto tyrimų organizacija, dirbanti žmonijos labui. Pirmieji jos rėmėjai buvo „Tesla Inc.“ generalinis direktorius Elonas Muskas, „LinkedIn“ įkūrėjas Reidas Hoffmanas ir ponas Altmanas.

 

     Vadovaujant ponui Altmanui, OpenAI 2019 m. sukūrė pelno siekiančią grupę, kad būtų lengviau surinkti pinigų skaičiavimo galiai, reikalingai algoritmams mokyti, finansuoti. Ji ėmėsi greitesnio požiūrio į savo AI modelių publikavimą, nei didesni konkurentai, tokie, kaip „Alphabet Inc.“ „Google“, kuri lėčiau paskelbė apie savo technologiją iš dalies dėl etinių problemų.

 

     „ChatGPT“, pokalbių robotas, suteikiantis vartotojams protingus atsakymus į tokias užklausas, kaip „apibūdinti dviejų kolegijos studentų diskusiją apie laisvųjų menų išsilavinimo vertę“, praėjus kelioms dienoms po lapkričio 30 d. pasiekė milijoną vartotojų, sako ponas Altmanas. Kai kurie pramonės stebėtojai gyrė įrankį, kaip didelį technologinį proveržį ir potencialią alternatyvą dabartinėms paieškos sistemoms, nors ponas Altmanas pripažino, kad programos rezultatuose dažnai buvo faktinių klaidų.

 

     OpenAI tikisi vieną dieną pasiekti tai, ką AI tyrėjai vadina „dirbtiniu bendruoju intelektu“ arba technologija, kuri gali visiškai atspindėti žmonių intelektą ir galimybes. Gruodį duodamas interviu žurnalui P. Altmanas sakė, kad OpenAI įrankiai gali pakeisti technologijas, panašiai į išmaniojo telefono išradimą, ir įveikti didesnius mokslinius iššūkius.

 

     Ponas Altmanas tuo metu sakė, kad „OpenAI“ neketina būti įsigyta ar išeiti į biržą, o tai reiškia, kad investuotojai, greičiausiai, galės išsigryninti tik per antrinį akcijų pardavimą. Ponas Altmanas neseniai investuotojams pasakė, kad bendrovė netrukus galės uždirbti iki 1 milijardo dolerių metinių pajamų, iš dalies apmokestindama vartotojus ir verslą už jos produktus, rašo žurnalas." [1]

 

1.  AI Startup Targets $29 Billion Value
Berber, Jin; Kruppa, Miles.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 06 Jan 2023: B.1.

AI Startup OpenAI Targets $29 Billion Value

"OpenAI, the research lab behind the viral ChatGPT chatbot, is in talks to sell existing shares in a tender offer that would value the company at around $29 billion, according to people familiar with the matter, making it one of the most valuable U.S. startups on paper despite generating little revenue.

Venture-capital firms Thrive Capital and Founders Fund are in talks to buy shares, the people said. The tender could total at least $300 million in OpenAI share sales, they said. The deal is structured as a tender offer, with the investors buying shares from existing shareholders such as employees, the people said.

The new deal would roughly double OpenAI's valuation from a prior tender offer completed in 2021, when OpenAI was valued at about $14 billion, The Wall Street Journal reported.

OpenAI has generated tens of millions of dollars in revenue, in part from selling its AI software to developers, but some investors have expressed skepticism that the company can generate meaningful revenue from the technology.

No final deal has been reached and terms could change, the people said. OpenAI declined to comment.

OpenAI released a series of artificial-intelligence-based products last year that captured the public's attention, including the image-generation program Dall-E 2 and chatbot ChatGPT.

If the tender goes through at that valuation, OpenAI would be one of the few startups able to raise money at higher valuations in the private market, where investors have pulled back from new deals given last year's technology rout.

Microsoft Corp. also has been in advanced talks to increase its investment in OpenAI, the Journal reported. In 2019, Microsoft invested $1 billion in OpenAI and became its preferred partner for commercializing new technologies for services like search engine Bing and design app Microsoft Design.

OpenAI, led by technology investor Sam Altman, was founded as a nonprofit in 2015 with the goal of pursuing artificial-intelligence research for the benefit of humanity. Its initial backers included Tesla Inc. Chief Executive Elon Musk, LinkedIn co-founder Reid Hoffman and Mr. Altman.

Under Mr. Altman, OpenAI created a for-profit arm in 2019 so it could more easily raise money to fund the computing power needed to train its algorithms. It took a quicker approach to releasing its AI models to the public than larger competitors like Alphabet Inc.'s Google, which has been slower to publicize its technology in part due to ethical concerns.

ChatGPT, the chatbot that gives users intelligent responses for queries such as "describe a debate between two college students about the value of a liberal arts education," crossed one million users a few days after its Nov. 30 launch, according to a tweet from Mr. Altman. Some industry observers have lauded the tool as a major technological breakthrough and a potential alternative to current search engines down the road, though Mr. Altman has acknowledged that the program's outputs often contained factual errors.

OpenAI hopes to one day achieve what AI researchers call "artificial general intelligence," or technology that can fully mirror the intelligence and capabilities of humans. In a December interview with the Journal, Mr. Altman said OpenAI's tools could transform technology similar to the invention of the smartphone and tackle larger scientific challenges.

Mr. Altman said at the time that OpenAI has no plans to get acquired or go public, meaning investors would likely only be able to cash out through secondary share sales. Mr. Altman has recently told investors that the company would soon be able to generate up to $1 billion in annual revenue in part by charging consumers and businesses for its products, the Journal has reported." [1]

1.  AI Startup Targets $29 Billion Value
Berber, Jin; Kruppa, Miles.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 06 Jan 2023: B.1.