How Much Amazon Stock Has Bezos Sold?

If you owned stock in a high-flying growth company, one not yet regularly profitable, and found out that the CEO was selling off hundreds of millions of dollars of stock, would you be upset?

Amazon.com (AMZN) CEO Jeff Bezos sold off 2 million shares in the past 16 months, which is slightly less than half of 1% of the company’s shares outstanding. For Bezos, it meant pocketing $444.38 million and taking down his holdings in Amazon by about 2%. He owns about a 19% stake now.

Half of this selling occurred in the first week of August, according to SEC filings collected at SecForm4.com. The other sales were recorded last year on Aug. 30, Nov. 29 and Nov. 30. All of these were automatic sales; not the kind that should make investors wonder if the insider knows something they don’t. Bezos’ sales were triggered when the shares reached predetermined (higher) prices.

AMZN Chart

AMZN data by YCharts

Yet these are big trades, in a company that’s still in the accelerating-revenue-few-profits stage of growth. Amazon’s high share price is backed by faith that Bezos and team can turn the company into a big money maker before big revenue gains slow down. Should shareholders expect the CEO to restrain from dumping shares before that work is done?

AMZN Revenue TTM Chart

AMZN Revenue TTM data by YCharts

Revenue growth has long propelled the stock. Now, one influential analyst, an Amazon bull, says an expanding gross profit margin is also behind the stock’s continued ascent. And as Amazon slashes prices and grows, it mows down other retailers, forsaking its own profits, making it the Suicide Bomber of Retail, and requiring other merchants – Five Below (FIVE), T.J. Maxx (TJX), Tractor Supply (TSCO) Family Dollar (FDO) and Cabela’s (CAB) are prime examples – to adopt Amazon-resistant strategies.

Amazon shares are the most expensive in the S&P 500 on forward price to earnings valuations, trading at prices that continually flummox stock analysts trying to place a fair value on the company. While PE ratios are usually high for high revenue growth companies, Amazon’s are completely out of whack with the rest of the market. The chart below shows Amazon’s valuation against several other popular growth stocks, including Netflix (NFLX), TripAdvisor (TRIP), Facebook (FB) and Chipotle Mexican Grill (CMG).

AMZN Forward PE Ratio Chart

AMZN Forward PE Ratio data by YCharts

Historically, extreme valuations make stocks vulnerable to sharp falls on even minor disappointing news. Amazon has so far largely avoided this feature, managing to clock share price gains even when earnings disappoint. Shareholders in any such growth stock should keep close watch for news that might trigger a slide, including sales of big blocks of shares.

It’s impossible to know whether Bezos’ sales – or any insider sales -- played a role in Amazon’s share price movements in the days before or following. Amazon shares declined about 6.5% in the weeks following Bezos’ August sales. The S&P 500 was down a little over 4% in that period. The share price rose after the November sales.

The latest sales are not the biggest for Bezos in recent years. Although there are no sales recorded for him in 2011, he sold some 6 million shares in 2010 and 3 million in 2009. Those gains totaled $809.76 million, bringing him to $1.25 billion in gains on these sales in less than five years. The 85.97 million shares he still owns are worth about $28 billion.

We could launch into a righteous rant here on the principle that no man on earth is worth $28 billion. On a more practical note, however, we’ll point out that Bezos’ compensation package aligns quite well with the shareholders he serves. He received no new stock options last year, and his salary at $81,840 was about what a tenured English professor might earn. Bezos, unlike many tech executives, depends almost exclusively on the rising price of Amazon shares to build his fortune. As we’ve said before, a big stake in the company on its own is a good enough reason for a CEO to get out of bed in the morning, and a far fairer to shareholders.

Really, it’s difficult to get worked up about Bezos’ stock sales while his fellow shareholders continue to make small fortunes of their own. Amazon shares are up some 41% in the past 12 months and some 550% in five years. Those kinds of gains have so far bought Amazon a lot of immunity from the normal risks of high-valued growth. But to be on the safe side, it wouldn’t hurt to follow Bezos’ lead. Sell a bit from time to time.

Dee Gill, a senior contributing editor at YCharts, is a former foreign correspondent for AP-Dow Jones News in London, where she covered the U.K. equities market and economic indicators. She has written for The New York Times, The Wall Street Journal, The Economist and Time magazine. She can be reached at editor@ycharts.com. Read the RIABiz profile of YCharts. You can also request a demonstration of YCharts Platinum.

Read more articles about: Company Analysis  executive compensation   amazon   

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