Corporate executives and directors tend to have superior information in relation to their firms’ operating activities. If these insiders are buying company stock, it’s often a bullish signal.
In this report, we are going to highlight some interesting insider buying at SoFi Technologies Inc (SOFI:US). SoFi is a digital personal finance company that allows members to borrow, save, and invest their money. The company, which aims to help people reach financial independence, currently has approximately 3.5 million members. It is listed on the NASDAQ Global Select Market and has a market capitalization of $7.7 billion at present.
SoFi Technologies Inc: Insider Buying
Our data shows that on March 17, two insiders at SoFi purchased stock. Those who bought shares were:
● CEO Anthony Noto (34,000 shares @ $8.91 per share)
● Director Harvey Schwartz (58,000 shares @ $8.84 per share).
Combined, the two insiders spent around $816,000 on the stock.
Investment Experience
There are a couple of things that stand out about this insider buying activity.
One is that both insiders have spent a considerable amount of money on company stock. This suggests they are confident the stock is set to rise.
Another is that both insiders have investment experience. Previously, Mr. Noto worked at Goldman Sachs, where he was named partner in 2004 and served as Head of Communications Media and Internet Equity Research. Mr. Schwartz also previously worked at Goldman Sachs, where he served as President and Co-COO. So, it’s fair to assume that these insiders know what they are doing here.
High Short Interest
Under normal circumstances, we would view these insider purchases as quite bullish.
However, one thing that concerns us in relation to SoFi stock is that short interest is very high at present. Looking at our short selling data, we can see that 187.45 million SoFi shares are currently on loan. That represents approximately 29% of the free float.
Digging deeper into the short side data, there are a number of other red flags. One is the fact that utilization is currently 100%, which indicates that demand from short sellers is very high right now. Another red flag is that year to date, the number of shares on loan has increased by around 170%. This is concerning in our view, as large increases in short selling activity tend to be followed by share price weakness.
Given the short selling data insights, we think caution is warranted towards the stock right now. The fact that short interest is so high suggests that many investors see downside risk at present.
