Selling At Silicon Valley: Routine Profit Taking Or Sign Of The Times?

From its chart, it’s easy to see that Silicon Valley Bancshares is no ordinary bank. The stock is already up 33% this year, after having gained 187% in ’99. In fact, SIVB is a unique hybrid bank/venture-cap firm that invest in emerging technology companies. Along with the dramatic gains, this tech involvement increases its volatility to levels far greater than that of the typical bank.

For example, the recent turn in the market sent shares of SIVB spiraling down over 60% from March through April. And while the issue rebounded due to a record 1Q earnings announcement, company insiders, who have been good evaluators of share price in the past, have filed to sell shares. From April 27 through May 18, seven SIVB insiders filed their intentions to sell 213,316 shares at prices ranging from $28.50 through $35 per share.

Chairman Daniel Kelleher led all sellers with registrations totaling 56,000 shares, while President, CEO John Dean filed to sell 50,000 shares, having purchased 2,000 shares in February ’99 at $9. Meanwhile, EVP, General Counsel Catherine Ngo, having perfectly timed an options exercise of multiple series on a 37% drop in April, was quick to register 10,000 shares, which will be her largest sale to date.

Curiously, Silicon Vally Bancshares issued a press release outlining the upcoming sales by Dean. According to the release, Dean will be selling up to 25% of his holdings over the next 12 to 18 months in order to pay off personal debt and diversify his holdings. Makes sense. Interesting that the company commented on these sales, yet made no mention of five other upper-level executives and one director also selling shares.

You may recall a similar situation at Cendant Corp.(CD). Back in February Cendant announced that CEO Henry Silverman would part with 1.8 million shares, but made no mention of accompanying selling by fellow executives. SIVB is no Cendant; still, one has to wonder why explanations were not provided for all the selling insiders.

The question really is whether the activity at SIVB is little more than routine profit taking or whether if reflects a chink in the armor of the super high-tech economy. There are those who insist that any decrease in the bank’s IPO/Venture Cap business will be more than offset by an increase in its traditional lending operations. These same supporters argue that only a fraction of the bank’s loan portfolio involves Internet companies, and that even a prolonged market turndown will have little effect on asset quality. That may well be.

Still, whatever the reason, SIVB insiders are not waiting for the stock to fully regain its (March highs. Perhaps, the selling is merely an upshot of the stock’s strong early-year performance. I mean, Wall Street certainly loves the stock. Perhaps all one can say at this point is that at a time when uncertainty faces many in its main constituency, SIVB insiders are adopting a rather cautious stance.

COPYRIGHT 2000 Thomson Financial Inc.

COPYRIGHT 2003 Gale Group

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