Directors of FTSE-listed companies are selling more of their own shares than they are buying, marking a U-turn since the EU referendum, when most were purchasing shares in their own companies.
According to figures from broker firm Olivetree Financial, between 26 July and 11 August directors of FTSE 100 and FTSE 250 firms sold shares amounting to £10.5m.
By comparison, just £1.6m shares were bought over this period.
This trend has gone full circle compared to the week after the Brexit vote, covering 24 to 30 June, when company directors purchased shares worth £14.3m, which according to Olivetree was the highest level spanning a five-day trading period.
Bella Brandon, strategist at the firm, said there is no “discernible pattern” over which sectors are being sold off, other than many companies have been strong performers.
One of the high profile names on the selling list was vice chairman and former chief executive of Jupiter Fund Management, Edward Bonham Carter, who sold nearly £4.2m worth of shares on 28 July.
We don’t know the future shape of the UK’s relationship with the EU and neither do corporate directors. Andrew WilsonAndrew Wilson, head of investments at wealth manager Towry, explained that generally company directors are best placed to know what is going on within their businesses, while perhaps also having an expert view on whether the shares are excessively over or under valued.
“It was interesting that many company directors predicted disaster on an ‘out’ vote in the UK’s referendum, and yet were clearly buying heavily on the initial market falls,” he stated.
“That said, this does seem to have turned to selling, as the FTSE has powered ahead.”
Mr Wilson said there is not much which can be read from this sell-off trend at this stage.
“We don’t know the future shape of the UK’s relationship with the EU, with all the ups and down along the negotiating path, and neither do corporate directors.
“So, although I don’t think that it is a good sign that directors are selling, it is hard to see why they wouldn’t, given the opacity of the UK’s economic future yet increasing valuation multiples on equity prices.”
One strategy is to take a contrarian approach with director dealings, in that occasionally they are almost too close to their business or industry, so cannot see changes in the broader economy, especially at inflection points, noted Mr Wilson.
“It certainly feels like a better time to be taking profit than putting new capital to work in the market, but equally there is nothing to stop an expensive market getting even more expensive, and in fairness, UK equities are hardly the most bubble-like of all the asset classes at the moment.”
katherine.denham@ft.com
