If top-level insiders are selling company stock, it can pay to approach the stock with caution. Insider sales can be a sign that the company is facing challenges or that the stock is overvalued.
In this report, we are going to highlight a large insider sale at Delta Air Lines Inc (DAL:US). Delta is one of the major airlines in the US and one of the largest airlines in the world by number of passengers carried. It is listed on the New York Stock Exchange and currently has a market capitalization of $19.4 billion.
Delta Air Lines: insider selling
An insider transaction that has caught our attention here is a large sale from CEO Ed Bastian on 22 October. Form 4 filings show that the insider sold 65,000 shares at a price of $33.58 per share. The sale generated proceeds of $2.2 million.
Source: 2iQ Research
This sale is worth highlighting for a couple of reasons. Firstly, it is a large sale. It has reduced the size of Bastian’s stake by 16%. This indicates the insider sees limited share price upside in the near term.
Secondly, Bastian is not the only insider to offload stock recently. In August, CFO Paul Jacobson sold DAL stock twice, netting proceeds of more than $1.3 million. Meanwhile, earlier in the year, Warren Buffett’s investment company, Berkshire Hathaway, dumped $314 million worth of Delta stock.
Hit hard by the pandemic
Airlines have been impacted significantly by Covid-19. Delta’s third-quarter results, posted in mid-October, demonstrated the magnitude of the disruption. For the quarter, adjusted revenue was down 79% to $2.6 billion while earnings per share were -$3.30 versus $2.33 for the same period last year.
Delta's CEO was upbeat about the future, stating that the actions Delta is taking now will allow the company “to accelerate into a post-Covid recovery."
However, his recent sale of shares indicates that, in reality, he is not so confident about the future. Given the size of his sale, and the fact that other insiders have sold Delta stock recently, we see the recent insider selling activity at Delta as a bearish signal.