Directors cash in as market recovery risks petering out
Tuesday 01 March 2005
Directors have sent a veiled warning to shareholders that the FTSE 100's recent run risks petering out, by selling millions of pounds worth of shares, a report claimed yesterday.
Stock sold by directors on average has shot higher during the past three months, up 25 per cent compared with the same period a year ago, research by DigitalLook.com, a financial website, found.
Giles Thorley, the chief executive of Punch Taverns, topped the league table of bosses with the least apparent faith in the future of their company or the stock market during the period, although Anita Roddick, the founder of The Body Shop, and Kevin Davis, the head of Man Group, the hedge fund, are similarly pessimistic.
Even as the FTSE 100 broke through the 5,000 barrier for the first time in almost three years, directors of FTSE 350 companies were cashing in almost £72m net worth of shares.
"Directors are taking advantage of the bounce back in the market to make huge amounts of money for themselves. But it does raise a question mark about where their company's share prices are going next," said Andy Yates, the director of DigitalLook.com. He saidthe research doubled as a "confidence barometer".
The report found that directors often chose to take advantage from the current FTSE 100 highs by exercising options and making large profits from the sales of those shares. Mr Thorley amassed his windfall by exercising options of 2 million shares worth 198p per share, and then selling his holding at 702p per share, making more than £10m in profit overnight.
"Directors are very canny. They understand their businesses. When you get a pattern of directors selling out or buying back in, it tends to suggest either positive or negative trends," Mr Yates said. "This shows that directors, like many brokers, think the current stock market rally has gone too far, too soon. It suggests they're not confident about the recovery continuing for the long term."
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