Cedears Alert: Nvidia CEO divests almost US$100 million in shares, what does it mean?

He Nvidia CEO Jensen Huangsold last Friday another US$31.5 million in shares of the semiconductor giant. With that move, he would have sold a little less $95 last week. In the same way do the “insiders” of the company, who accelerated the pace of sales, so the question that arises is what these movements are due to and if they will have any impact in the listing of the Argentine Deposit Certificates (Cedears) of that company.

It happens that Nvidia is increasing its market capitalization in the last year. And, although it managed to take the podium for a few days as the most valuable company in the world by marketcap, on Thursday returned that title to Microsoft. Thus, in the midst of some corrections that were seen last week and taking advantage of the pause that the company is takingHuang and other insiders accelerated profit taking at a very good pricebut What does this mean for the local Cedears market??

This Monday and after two consecutive days of falls for Nvidia’s stock, Cedear of the artificial intelligence firm corrects by 15% approximately, as the market expected. However, the red spreads on Wall Street, where the paper falls almost 5% (-4.8%).

A sign: the increase in “insider transactions”

As stated to Ámbito Ignacio SniechowskiHead of Equity of the IEB Group, it is always interesting to analyze what the directors of a company are doing with their stock holdings. And what it refers to is that “insiders” are individuals who have access to confidential information and not public about the company, in this case Nvidia. This includes directors, executives, high-level employees and other people who may consult other types of data due to their position within the firm.

That is why Stock buying and selling activities by these players are closely watched by investors and regulators due to their potential impact on the market.. The movements of the “insiders” are usually a signal about the internal perspective they have regarding the future of the company, as the investment advisor explains. Gaston Lentini.

Sniechowski slips that, In the case of Nvidia, a greater volume of operations is clearly noticeable, “the so-called ‘insider transactions’”. The strategist assures that “one must rule out that such sales are made due to events that may affect the price of the share”. This is because the Securities and Exchange Commission (SEC), the US regulator, would heavily sanction such conduct.

Well, the sale by “insiders” is strongly controlled in the United States and subject to harsh sanctions if it is detected that “They were done with privileged information”.

Trees don’t grow to the sky

Lentini comments, for his part, that Nvidia It is a company that continues to surprise analysts, since, although it may seem expensive, “reinvents itself again to earn more”. However, the strategist maintains that “Trees do not grow to the sky and the company will have to correct sooner or later” its price.

Lentini adds that Huang has already sold too a package in September 2023 of about US$40 million. “Now it sold about $30 million more, but it is really a small amount, if we consider that the share price has risen more than 1,000% since January 2023.” That is to say, if he had US$10 million at that time, he would now have more than US$100 million.

However, and apart from this, it explains that a senior executive divests part of his own company’s shares “It should make us think that he has perhaps more important and better projects where he can put the money or that the company is at such high prices that even he himself is thinking about reducing his position,” and that is why he could be taking profits.

Nvidia: What reading is left to do?

In line with what Lentini stated, Sniechowski slips that, at current values, many “insiders” consider it a good price to sell. And “Nvidia closed at $126 per share; Comparing this value with US$132 per share, which is the average target price for the coming months estimated by the more than 70 analysts who cover the company, shows a relatively limited upside.”

Nvidia selling Insiders.jpeg

“As can be seen in the graph, in March there was another moment of strong insider selling“, which coincided with a new record for Nvidia,” adds Sniechowski.

This way, warning signs for investors of that company are ruled out, although it does not hurt to follow this type of operations by managers, since the market in general does not look favorably when “insiders” make strong sales; “not because events are coming that will alter the share price (as we mentioned that should be ruled out), but mainly because the reading that is made is that it is a good price to leave” of that role, Sniechowski concludes.