Increase in shares outstanding last week was biggest this decade, firm says
May 18, 2009, 2:47 p.m. EST
By Alistair Barr, MarketWatch
SAN FRANCISCO (MarketWatch) -- As the stock market rallied in recent months, company insiders have been selling, a sign that investors should exit, too, TrimTabs Investment Research said Monday.
"As investors have turned more upbeat, the smartest money in the stock market has been leaving the party," TrimTabs wrote in a note to clients.
TrimTabs, run by Charles Biderman, tracks share buybacks and acquisitions, along with new equity issuance by companies and stock buying and selling by chief executives and other corporate insiders.
This allows the firm to gauge the level of outstanding shares, or "float," in the market -- potentially useful information when trying to work out which way prices are heading next. It's particularly helpful because companies and their executives know more than outsiders such as investors, TrimTabs argues.
Judging by the behavior of these insiders in recent weeks, the signs aren't good for the stock market, the firm said Monday.
Last week there were $31.3 billion of new equity offerings, as many of the nation's largest banks sold stock to raise new capital, TrimTabs reported, noting that's the highest level of issuance this decade.
"Companies took advantage of the rally to flood the market with new shares," TrimTabs wrote.
Meanwhile, announced corporate buying was "almost non-existent," no new cash takeovers were unveiled and insiders sold $500 million worth of stock, the firm added.
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