‘Unusual Selling’ Inside JPMorgan
A chorus of high-level executives inside JPMorgan are selling down their stakes in the company, in what some experts are citing as "unusual" activity within the nation's largest bank by deposits.
Those sales followed better-than-expected earnings released October 12, which prompted a flurry of executives to sell big batches of JPMorgan stock the following business day. More sales took place the following week. (Click here to get the latest quotes for JPMorgan.)
In sum, executives on JP Morgan's operating committee have reaped proceeds greater than $6 million since October 15th – a move that appears uncharacteristic for the bank, according to Ben Silverman, director of research at InsiderScore.com, which tracks insider buying and selling activity.
"This is an unusual cluster of sales in that we typically don't see this many insiders at the company [JPMorgan] selling at the same time," Silverman said. "We look at events like this as a negative event for the stock.
On Oct. 19, Mary Erdoes, CEO of JP Morgan Asset Management, sold 40,000 shares at $42.46 each, for roughly $1.7 million in proceeds.
On Oct. 17, John Donnelly, director of human resources, sold 40% of his JPM stock in his first insider transaction: Cashing in $1.1 million in shares at $43.29 apiece.
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Two days earlier, executives across investment, consumer and mortgage banking made big sales. On Oct. 15 – the first business day post-earnings – Michael Cavanagh, the newly installed co-CEO of the investment bank, sold 40,000 at $42.00, cashing in roughly $1.7 million. Gordon Smith, Chase co-CEO of Consumer & Community Banking, cashed in 28,300 shares in a sale totaling $1.2 million. Frank Bisignano, the bank's co-COO and head of JPM's Mortgage Banking unit, sold $844,900 worth of stock at $42.25.
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JPMorgan shares have rallied more than 30% following the infamous "London Whale" trading blunder, for which the bank has said losses could reach $7 billion.
Silverman says that insider stock sales ram up following earnings release. For JP Morgan, that might be especially true for the operating committee, the bank's highest-level brain trust. Company spokesperson Joe Evangelisti said the committee is precluded from selling stock, except within specifically designated windows, most following earnings.
"All of their sales will be in these windows," Evangelisti said. "They also hold onto at least 75% of their JPM stock, so they're keeping a lot more than they're selling."
Jeff Harte, a principal with Sandler O'Neill who covers bank stocks (including JPMorgan) says he doesn't read such selling activity as a warning sign for the company.
"I haven't found that with big banks or brokers, that trends in insider selling have told me all that much – there's a lot of noise," Harte told CNBC, adding that insiders could be cashing out of positions in anticipation of a higher tax bill or for personal reasons not related to the bank's underlying health.
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Weakness in shares following the company's second-quarter disclosure of losses was seen by CEO Jamie Dimon, for one, as a buying opportunity. Dimon snapped up 500,000 shares on July 20th worth an estimated $17 million – the stock is up 23% from that point, meaning Dimon has made roughly $4 million on that purchase.