Netflix, Inc. (NFLX): Steady Selling

Other company insiders have shown less faith in Netflix’s potential. Just in the past two months, two of the six independent directors on Netflix’s board have made major sales. In July, George Battle sold more than 23,000 shares of Netflix stock, while Timothy Haley sold nearly 20,000 shares in August. Director Leslie Kilgore (who was Netflix’s chief marketing officer until early 2012 ) has been selling at a steadier pace over the course of the year, dumping nearly 40,000 shares in total.

Among prominent Netflix executives, Chief Content Officer Ted Sarandos sold more than 83,000 shares shortly after Netflix popped above $200 in May. General Counsel David Hyman began selling around the same time, and has unloaded more than 26,000 shares since May. CFO David Wells also joined the party in May, and has sold more than 30,000 shares since then.

Foolish bottom line
Netflix executives may seem confident in the company’s future when they appear on conference calls or talk to the media. However, a look at what they are doing casts doubt on this facade. Numerous Netflix, Inc. (NASDAQ:NFLX) officers and directors are selling millions of dollars worth of stock acquired through options. Aside from Reed Hastings, most of these insiders do not have significant long-term holdings of Netflix stock.

Of course, insider selling does not guarantee that a stock is going to fall. However, the behavior of many Netflix insiders suggests that their incentives may not be fully aligned with those of long-term shareholders. By exercising stock options and selling immediately, these officers and directors are banking millions of dollars of profits based on Netflix, Inc. (NASDAQ:NFLX)’s current stock price. If this year’s Netflix stock rally turns out to be yet another bubble, these insiders will not suffer nearly as much as shareholders who are still holding their positions.

The article Netflix Insiders Take the Money and Run originally appeared on Fool.com and is written by Adam Levine-Weinberg.

Fool contributor Adam Levine-Weinberg is short shares of Netflix and is long December 2013 $275 puts on Netflix. The Motley Fool recommends and owns shares of Netflix.

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