Topics covered in this article:
- Recent Insider Transactions
- Ownership Breakdown
- Top Shareholders
Frequently Asked Questions (FAQs)
- Where does your data provider source Ownership Data?
- Where does your data provider source Insider Transactions Data
- Video Guide: Understanding the Ownership Section
- Key information and their descriptions
- CEO Compensation Analysis
- CEO Information and Background
- Company Leadership Team
- Company Board Members
- Video Guide: Understanding the Management Section
In the ownership section, we analyze the sentiments of insiders by examining their open and off-market transactions. We also evaluate whether shareholders have been diluted by checking the historical shares outstanding. Metrics in the Ownership section are not incorporated in the Snowflake. It's included in the report as additional information designed to aid users in making well-informed investment decisions.
This section provides an overview of the open-market and private (a.k.a off-market or negotiated transaction) transactions done by individuals and institutional insiders in the past 12 months.
Insiders are usually directors, officers, or employees of a company who are required to report to the relevant regulatory body when they buy or sell shares in their company referred to as the insider tranactions. It can also include institutions or companies which have beneficial ownership in the company.
Open Market transaction
It is a buy or sell transaction executed on a stock exchange at a market price, voluntarily initiated by an insider, and conducted in compliance with the rules and regulations set out by the SEC. It’s usually filed in SEC Form 4 with a transaction code of P for acquisition and S for disposition.
Private (off-market) transaction
Sale or purchase of shares between parties without going through the marketplace. Private acquisitions and dispositions typically occur through negotiated agreements between private parties.
How is the off-market insider transaction captured if it’s private?
Whenever there is a change in insiders' holdings, they are required to report it usually in the stock exchanges.
How do you determine if a transaction is a private type of transaction?
We do not explicitly distinguish between transaction types in our report. As long as the transaction type is either open-market or off-market (private), it will be displayed in our report. However, for reference, our data provider considers a transaction to be of the off-market type if the Transaction code "P" for "Acquisition" or "S" for "Disposition" is reported in the Non-Derivative table, and the transaction price is not within the price range on that date.
Here’s an example of off-market transactions reflected in our report.
ValueAct Capital Management L.P (considered as Insider). sold 3.4 million shares of NYSE:CBRE at a price of $8.8 per share. The transaction code for this is "S," and the price of $8.8 falls outside the price range for that date. Therefore this is considered as an off-market transaction by our data provider.
Insider Trading Volume
This is the volume of insider transactions done in the open market for the past 12 months.
We check both open-market and private (off-market) transactions done by individual insiders over the past 3 months. If there have been more buy transactions than sell transactions during this period, the company will pass this check.
In the example below, at the time of the publication of this article, for NasdaqGS:MSFT, over the past 3 months, there have only been sell transactions. Therefore, the company failed in this check.
Ownership Breakdown is the distribution of shares among different types of shareholders. It helps to understand who owns the company and in what proportion.
Private Companies - These are non-publicly traded companies that hold shares in the company.
Individual Insiders - These are individuals who hold a certain percentage of shares in the company. They can include company - executives, board members, and other employees.
State or Government - These are government entities or state-owned organizations that hold shares in the company.
General Public - These are individual investors who are not affiliated with any specific institution.
Institution - These are shares held by institutional investors such as mutual funds, pension funds, and other investment firms.
Dilution of Shares check - We look at the change in the number of shares outstanding over a 1-year period. Any increase above 2% is considered dilution, while a change exceeding 50% is regarded as significant dilution. Any events causing shares outstanding to change will be accounted for except for stock split.
As an example for NasdaqGS:MSFT, their total number of shares outstanding has decreased over the past year due to share repurchases as shown in the screenshot below. Since shareholders have not experienced dilution, the company passes the Dilution of Shares check.
Source: 10-K for MSFT
Top Shareholders are investors who are identified in the share registry of the company who hold the highest number of shares. These excludes investors who hold stocks under nominee accounts or broker accounts also known as “Street Name”.
1. Where does your data provider source ownership data?
Here are the sources where are data provider collects ownership data
Proxies and Annuals (a few Quarterly and Interim Reports) and Exchange Notifications of "the issuer" from Regulatory Agencies, Stock Exchanges, and Company Websites
Portfolio filings of Institutions (13Fs) from Regulatory Agencies.
Portfolio filings of Funds from Regulatory Agencies, Stock Exchanges, Company Websites, and Direct Relationships with a contact at Sponsor.
3rd Party Data Feeds
2. Where does your data provider source insider transaction data?
- Our data provider source and collects data from the Form 4 filing of the company for US listed companies.
According to US SEC, "Disclosure of information specified on this Form is mandatory. The information will be used for the primary purpose of disclosing the transactions and holdings of directors, officers, and beneficial owners of registered companies. Information disclosed will be a matter of public record and available for inspection by members of the public. The Commission can use it in investigations or litigation involving the federal securities laws or other civil, criminal, or regulatory statutes or provisions, as well as for referral to other governmental authorities and self-regulatory organizations. Failure to disclose required information may result in civil or criminal action against persons involved for violations of the Federal securities laws and rules."
- Apart from form-4, they are also collecting and displaying the insider transaction data from Form-3, 5 and 13D/G filings which are fields in SEC-EDGAR.
- And, similar forms of the above as required by other exchanges around the world.
The management section on our company reports does not contribute any scores in the Snowflake and therefore does not affect the color or shape of it. However, in this section we still do some checks as a complimentary analysis and to assist with investor's investment decision-making. We check whether the CEO's total compensation is reasonable when compared to similar-sized companies in the market. We also evaluate the CEO's compensation in relation to the company's performance. If CEO compensation is out of step with company performance or the marketplace, this may indicate that management's interests are not well aligned with the company or shareholders.
In addition, we analyze the experiece level of both the management team and the board members by examining their average tenure. This information helps us gauge the depth of knowledge and expertise within the company's leadership, which can have significant implications for the company's overall performance and decision-making processes.
Here are the key data and metrics that we focus on in this section:
CEO Compensation VS Market
CEO Compensation VS Company’s Earnings
Board Members Experience
Sample Screenshot for MSFT
This is the sum of all forms of payments and benefits received by the CEO based on the latest report available. This includes salary, bonus, stock options, and other perks. The total compensation may vary by company and individual agreements.
CEO Salary Percentage
This is the percentage of the CEO's total compensation allocated toward salary. This portion of total compensation is paid regardless of the company's performance.
The length of time the CEO has been in their current role. Therefore, this is not necessarily the total length of the CEO’s employment (which may be longer).
The percentage of shares owned by the CEO, indicating their personal investment in the company and alignment with shareholders' interests.
Management Average Tenure
This is the average length of time the members of the management team have been in their roles. This indicates the stability and experience of the company's leadership.
Board Average Tenure
The average length of time that members of the board of directors have served on the board. The board governs the company, while the management team runs the business.
Compensation vs Market
We compare each company with a group of companies of similar size, and then test how the CEO is paid compared to the median of that group. If the CEO is paid 30% or more less than the median, then we consider pay to be below average. If the CEO is paid within 30% of the median pay, then we consider the pay to be around average. If the CEO is paid 30% or more above the median pay, then we consider the pay to be above average. The company will fail this check if the CEO’s total compensation is above the median average.
For NasdaqGS:MSFT, the CEO’s total compensation of US$54.95m is above the median average, hence it failed this check.
Compensation vs Earnings
The company will fail that check if it is loss-making and the CEO’s total compensation has increased over the past year. It will also fail if the CEO’s total compensation has increased by more than 20%, regardless of earnings growth.
For NasdaqGS:MSFT, the company is not loss-making, and the CEO’s total compensation had only increased 10%, hence it passed this check
In this sub-section, we provide a brief background about the company's current CEO, including information about their tenure in their current role and details about their total compensation. Below is an example for MSFT.
We analyze the experience level of the company's management team. We also provide information on the total compensation of each member of the management team, the number of shares they own, and the average age of the team.
Management team experience
If the median average tenure of the management team on average is less than 2 years, the company will fail this check.
For NasdsaqGS:MSFT, the median average tenure of the management team is 8.8 years, hence the company passed this check.
In this sub-section, we analyze the experience level of the company's board members. We also provide information on the total compensation of each member of the board, the number of shares they own, and the average age of the team.
Board member experience
If the median average tenure of the Board of Directors is less than 3 years this check is flagged.
For NasdsaqGS:MSFT, the median average tenure of the Board members is 7.8 years, hence the company passed this check.