If multiple insiders at the same organization are buying company stock simultaneously, it’s often worth taking a closer look. This buying pattern – which is known as ‘cluster buying’ – is a particularly strong insider trading signal.
In this report, we are going to highlight an interesting cluster buying pattern at NRG Energy Inc (NRG:US). NRG Energy is a consumer services company that sells energy and related products and services in the US and Canada. At present, it has around 5.5 million customers. It is listed on the New York Stock Exchange and currently has a market cap of $7.3 billion.
Insider Buying at NRG Energy
Our data shows that between December 15 and December 16, there were six insiders dealing with NRG Energy's stock. Those who purchased shares were:
President and CEO Mauricio Gutierrez (15,000 shares @ $32.03 per share)
Chairman Lawrence Coben (15,000 shares @ $31.70 per share)
Board member Heather Cox (1,571 shares @ $31.32 per share)
Board member Paul Hobby (3,500 shares @ $31.37 per share)
Board member Antonio****Carrillo (9,000 shares @ $31.71 per share)
Board member Elisabeth Donohue (2,500 shares @ $31.32 per share)
Combined, the insiders invested around $1.5 million in company stock.
There are a couple of things that stand out here. One is that a number of the insiders have made very large purchases. The CEO, for example, has spent close to half a million dollars on company stock.
Another thing that stands out here is that several top-level insiders have purchased stock. Top-level insiders tend to have the most information on their businesses. Our insider model views this trading activity as bullish.
Vivint Smart Home Acquisition
Earlier this month, NRG announced that it had entered into a definitive agreement to acquire Vivint Smart Home in a $2.8 billion all-cash transaction. Vivint Smart Home is a leading smart home platform company that aims to help customers live intelligently by providing them with technology, products, and services to create a smarter, more efficient, and safer home.
NRG said that the transaction will improve and diversify its financial profile while also expanding its total market opportunity.
“The acquisition of Vivint is a transformational step in achieving our vision. Customers want simple, connected, and customized experiences that provide peace of mind. Vivint’s smart home technology strengthens our retail platform, improves our customer experience, and increases customer lifetime value,” said President and CEO Mauricio Gutierrez.
Now, the market didn’t like this deal as NRG’s share price fell heavily immediately after the announcement. This is most likely due to the fact that NRG will take on $2.4 billion in debt as part of the deal. It could also be related to Vivint's lack of profitability.
Those within the company, however, are clearly more optimistic about the deal. The fact that insiders have spent around $1.5 million on NRG stock suggests that they believe the deal will create shareholder value.
We view insider buying here as a bullish indicator.