If you have a CEO or a person who is considered to be an insider sell...

If you have a CEO or a person who is considered to be an insider sell a large block of stock and he gets reported through the security and exchange commission, is that a sign that the company as well as the stop is headed for challenging times?

Expert Solution

Yes, its Sign that Company as well as the stop is headed for Challenging times.

In Layman terms, Insider means"A person within a group or organization, especially someone privy to information unavailable to others".

First of all, Insider trading is illegal.Illegal insider trading is the buying or selling of a security by insiders who possess material that is still not public.

And at the same time, It is legal too.Legal insider trading is when the insiders of the company trade shares but at the same time report the trade to the Securities and Exchanges Commission (SEC) with stipulated time .

Normally person sells the stock only when he feels that Company losses some heavy contracts or there exists any negative scenerio that impact the going concern in the future.

In the present case, there exist two situations.

1. If CEO not reported to SEC with in Stipulated time : It is illegal and it is the bad sign for company's future.

2. Selling Large Stock : Normally persons sells large stock only when they feels that company will not perform much in future.

By this we can say that, CEO who is a Insider and selling large number of stocks without reporting to SEC will sure be the cause for company as well as the stop is headed for challenging times.

jeff jeffy answered 2 months ago

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