What a difference a year makes….well 10 months !
We revealed in our post-Brexit blog back in June of last year how senior directors(‘insiders‘) of the largest UK companies were using the market sell off as an opportunity to invest their personal wealth back into their own businesses by buying company stock. At the time, it was a telling signal that they believed their own companies were mispriced and undervalued, whilst simultaneously boosting market confidence about the limited impact of Brexit on UK PLC.
Retrospectively it seems these directors were vindicated in their assessment. The pullback was temporary and the market has since rallied a further 14% from pre–Brexit levels and some have made a killing.
So lets roll forward 10 months…..
Today’s insider analysis now paints a very different picture, well, certainly for the UK companies most exposed to fluctuations in sterling, the UK 250 Mid-Caps.
The Net Discretionary Transaction Value(Sells vs Buys) of insider transactions for this segment of the market over the last three months has seen its highest selling intensity since the same three month period in 2007. A total of £173m worth of company stock was sold from February to April, over four times more than was bought by directors.
Our analysis shows there has been two real notable periods of consistent, high intensity insider selling in UK Mid-Caps both coinciding with negative event catalysts; in 2007 ahead of the impending Credit Crisis and in similarly in 2010 at the onset of the Greek Debt crisis.
Are we to assume this increased vigour to sell company stock represents an about turn by the directors of UK PLC and their estimation of the company’s fortunes in a post-Brexit world ? Or now that they have had time to properly assess the impact of Brexit on their businesses are they unknowingly signalling to the market about an expected material slowdown in business conditions ? Time will tell…
We also noted in our previous Brexit blog that Andrew Pidgley the Executive Chairman at UK property firm Berkeley Group had transacted the single largest individual buy trade in the immediate aftermath of the vote, purchasing c£1m worth of stock. Those who use OTAS to monitor his transaction history will have seen that he has recently sold over £31m worth of stock(around 15% of his total holding,) his largest single transaction ever. Furthermore, they will have identified his previous selling history as particularly knowledgeable.
With the triggering of Article 50 now discounted by the market, the focus turns to the next two years of negotiations and it will be this that has the greatest influence on UK companies. However, if the market is looking a for a proxy on the confidence of UK businesses it only needs to looks at how some of their leaders are positioning themselves now, especially in the sectors which are potentially most exposed.