Why Are Moderna Insiders Selling So Many Shares?
Moderna CEO Stephane Bancel made news this morning by stating that Moderna would be pausing its Covid-19 trial enrollment to ensure ethnic diversity among the participants. That was reported by CNBC, but the real news regarding Moderna and its stock is readily available via SEC filings.
The pace and frequency of sales of MRNA stock by Moderna insiders is shocking to me. According to Nasdaq NDAQ data, in the past 3 months there has been one open market purchase of MRNA shares by an insider amounting to 50,010 shares and there have been 76 insider sales amounting to 12,188,398 shares. In the past year the discrepancy is just as wide; 4 purchases of a combined 200,341 shares by insiders and 212 sales of a combined 39,086,672 shares by insiders.
The problem with MRNA stock now is a simple one of supply and demand. There is a seemingly endless barrage of MRNA shares hitting the market from selling by insiders and selling by the company. Moderna has raised $1.84 billion in two separate equity offerings this year, one in May and one in February. But Moderna only has 5% holder, its chairman, Noubar Afeyan, who controlled 14.2% of MRNA shares outstanding as of the most recent proxy statement.
This is extraordinary. I have been reading SEC documents for the past three decades and I have never seen such a mismatch between insider selling and (largely nonexistent in the case of MRNA) insider buying.
CEO Bancel’s sales are mostly carried out through a 10b5-1 program, in which periodic sales are executed. Often this is to fulfill tax obligations on shares that are granted via options and restricted shares granted through ownership programs.
So, Bancel, CFO Lorence Kim, Chief Medical Officer Tal Zaks and many others have been given stock in Moderna, which is an admirable way to ensure executive loyalty, but they are dumping these shares into the market at alarming rates.
It begs the question: why? Do insiders know something about the efficacy of Moderna’s Covid-19 vaccine candidate, MRNA-1273, that investors do not? Equity analysts simply have to ask that question. There are no cockeyed conspiracy theories, but public market activity needs to be explained.
Regardless of motivation, there is a constantly growing supply of Moderna shares and no single large entity that is a natural buyer. That will continue to pressure the price of MRNA, in my opinion.
As I mentioned in yesterday’s Forbes column, my firm, Excelsior Capital Partners, owns shares in Arcturus Therapeutics, which also has a Covid-19 vaccine candidate, ARCT-021. So, I read news on Moderna as it is released, and I am sure the financial media will breathlessly cover Phase 3 results from Moderna’s in-progress testing of MRNA-1273 as that data is released.
But an investor must remember what she is buying if she buys MRNA shares. Hope. I am not anti-science, as my firm’s position in ARCT would indicate, but I am also a veteran analyst of financial statements, and it is impossible not to notice how little “there” is “there” for Moderna.
This company does not have the financial backbone to justify a $24 billion valuation. Not even close. Any bad news on MRNA-1273 will send these shares tumbling, and they have already declined more than 30% from July’s all-time high, which was near $100 per share.
I will not speculate on the motivation of Moderna insiders, but their constant dumping of MRNA shares adds an additional layer of risk to the MRNA story. Moderna is a very risky stock. Be careful.