Moderna Inc (NASDAQ: MRNA) has been one of the hottest stocks of 2020 due to its coronavirus (COVID-19) vaccine candidate currently undergoing clinical trials.
The stock has recently come under fire due to the large number of shares company insiders have been selling. In reality, many of these insider sales are not necessarily a bearish indicator for the stock, but one large sale reported Tuesday evening just might be.
What Is A 10b5-1 Trading Plan?
On May 18, Moderna announced positive data on its vaccine candidate and the stock skyrocketed. Within two days, the company’s CEO, CFO and chief medical officer and general counsel sold more than 200,000 shares of stock.
However, all 200,000 shares sold during that period were part of 10b5-1 trading plans. SEC Rule 10b5-1 allows company insiders to set up regularly-scheduled stock sales of predetermined numbers of shares on certain future dates. One of the advantages of 10b5-1 trading plans for executives is that it allows them to sell their shares over time without being accused of insider trading associated with events like positive trial data.
In fact, Moderna’s CEO actually sold a large chunk of stock just three days prior to the positive trial data thanks to the same 10b5-1 trading plan.
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Why This One Is Different
On Tuesday, major Moderna investor Flagship Venture Fund IV reported it sold roughly 1 million shares of Moderna stock at prices ranging from between $65.76 and $72.43. Those shares were worth a combined $67.4 million. These sales took place on May 21 and May 22, within days of the positive trial data and were not part of a 10b5-1 trading plan.
The silver lining for investors is that even the large insider sale for Flagship Venture Fund only represented about a 5% reduction of its stake in Moderna. The fund still holds about 19.27 million shares, according to OpenInsider.
While the Flagship sales reported Tuesday aren’t necessarily a red flag by themselves, Moderna traders should keep monitoring insider trades in the coming weeks to watch for patterns outside of the typical 10b5-1 trading. Three of Moderna’s vaccine trial candidates have reportedly experienced adverse reactions to the vaccine.
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