In today’s market, Rocket Lab (NASDAQ:RKLB) is among the top declining stocks on watch for a number of investors. In early afternoon trading, RKLB stock plunged 9%. Investors priced in a key headline that is creating most of the consternation around this stock today.
News that Rocket Lab’s founder, Peter Beck, has reportedly filed to sell 3.6 million shares has investors in selling mode today. This sale would amount to a little less than $20 million at current prices, though it’s unclear what price the proposed sale will ultimately close at.
Let’s dive into what this means for investors and why this is causing such a drop for Rocket Lab today.
RKLB Stock Sinks on Insider Selling Activity
Investor responses to insider transactions can vary. In many cases, the market will often brush off insider transactions (even insider sales). Executives often want to offload some shares to diversify their holdings, add another vacation home or simply bolster their personal balance sheets. Thus, with the intent or rationale unclear, the market as a whole often has difficulty digesting what to make of many insider sales.
That said, the size and prominence of this transaction, as well as its timing (coinciding with a recent surge in RKLB stock) clearly has some investors concerned. Insiders are privy to material non-public information, and, as such, when they make big transactions (such as a $20 million stock sale), investors have to ask which way is up. That’s simply how it works.
Retail investors operating with less information than insiders don’t want to be left holding the bag. When insiders sell after a big surge, an implicit signal is sent that perhaps this stock is overvalued. Indeed, today’s price action with RKLB stock seems to indicate most investors feel this way.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
