Taking advantage of record-high stock prices and a booming video game market, insiders at L.A.'s two leading video game makers have been cashing in a substantial number of shares in some cases liquidating as much as half of their personal holdings.
The action is being led by Activision Inc., where this year insiders have sold more than 2.6 million shares, according to Thomson Financial/First Call, six times the number sold in 2000.
Activision has been trading near its 52-week high of $41.15, and closed at $36.25 on Nov. 20.Among the Activision insiders and executives who have sold:
- Robert Kotick, co-chairman and chief executive. He has sold 738,500 shares at prices ranging from $22 to $33.95 since March, for an aggregate value of just under $28 million.
The sales represent around 17 percent of the chairman's total holdings, based on a proxy statement filed with the Securities and Exchange Commission on June 25.
- Brian Kelly, co-chairman. Kelly has cashed in more than $26 million in company stock by selling 879,900 shares between February and October. The sales represent about one quarter of Kelly's total holdings.
- Robert Doornink, president and chief operating officer. Doornink has liquidated nearly half his holdings between February and October, collecting more than $8 million.
A company spokeswoman said all three executives were traveling last week and could not be reached for comment. Analysts have said that the slew of insider sales, while not alarming, could be a signal for investors to take profits of their own.
"This might be a group of stocks that's becoming appropriately valued," said Paul Elliott, an analyst at Thomson Financial/First Call. "The most informed individuals out there are taking some profits that's meaningful."
David Coleman, editor of Vickers Weekly Insider, said investors should consider backing off Activision stock, if for no other reason than to diversify their holdings. "Stockholders may want to use this as a (sign) to re-evaluate their position or re-balance their portfolios," said Coleman. "I wouldn't take it as an indication that shareholders should completely reduce their position, but it is a reason (for investors) to think about why they bought the stock in the first place."
Calabasas-based THQ Inc. also has seen substantial insider sales this year. The top three executives have sold 240,624 shares so far in 2001, more than double the total for 2000.
Since March, Jeffrey Lapin, the company's chairman and chief operating officer, has sold 100,000 shares with an aggregate value of $3.8 million.
Brian Farrell, THQ's chief executive, also sold 100,000 shares for roughly the same amount. For Lapin and Farrell, 100,000 shares represents about 29 percent and 16 percent, respectively, of their personal holdings.
THQ closed at $54.11 on Nov. 20. Trading over the last 52 weeks ranged from $16.89 to $62.
Executives from THQ were also said to be traveling last week and unavailable for comment.
Analysts say the recent activity is a sign that gaming executives are, for the most part, satisfied with the valuations of their companies.
"I think a lot of these guys have believed their stock has been grossly undervalued and that one day the industry would get the respect it deserves," said Miguel Iribarren, a senior research analyst with Wedbush Morgan in Los Angeles. "That's starting to happen.
"It doesn't make sense to have all your wealth tied up in one company," he said. "I don't expect to see anyone liquidate their holdings completely, but you should continue to see them sell substantial portions as the stock goes up."
Sales of video game hardware, software and accessories were 33 percent greater in the first nine months of the year than the like time period last year, according to NPDFunworld, a market research firm in Port Washington, N.Y.
Sales have been driven in part by Sony's Playstation 2 console. With the launch of two new consoles earlier this month, Nintendo's Game Cube and Microsoft's debut effort, the Xbox, many analysts are predicting a record-breaking year for the industry as a whole, with sales possibly exceeding $7 billion.
While Iribarren said he thinks both Activision and THQ shares will continue to rise, albeit at a more modest rate, individual investors would be wise to follow insiders' lead.
"I think for anyone who's owned Activision for six or nine months it's not a bad idea to take some off the table," Iribarren said. "That's decent portfolio advice for anyone."
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