Eye on Insiders: Activision Blizzard

Watching insiders is like participating in a weeks-long stakeout. You expect something to happen, but you don't know what. So you settle in, sip your coffee, and wait for clues to solving the big case.

Here, the "case" is direction: Which way is your stock headed? The "clues" come in the form of insider buying and selling action. Have a look at what the action has been like at Activision Blizzard (NASDAQ:ATVI) over the past year.

Sources: Form 4 Oracle, Capital IQ, and Motley Fool CAPS. (Data current as of July 21, 2009.)
*Open-market sales and purchases only.

What we're tracking here, and why
Insider buying data can be confusing. Here, I'm concentrating only on buying and selling conducted in the open market. With most of these transactions, insiders control the timing. Other times they're buying or selling under the purview of a 10b5-1 plan. Either way, personal holdings are being bought and sold.

Personal holdings are what matter most -- they're the shares executives hold for investment, rather than compensation. Employee stock options are different; they're compensatory in the purest sense. I've stripped out options-related buying and selling from the calculations you see above.

The Foolish view
Few investors who aren't already short will be excited by the volume of shares Activision Blizzard's insiders have sold. But this story may not be as bad as it looks.

Kelley, the most recent seller, sold all those shares on behalf of the "800370D Trust," for which he is an investment advisor and beneficiary. The rest of his Form 4 filing is littered with activity, but all of it is options-driven. In this regard, note that all the options he exercised were exercisable beginning way back in May 2001, October 2001, or April 2003. Kudos to him for holding them so long.

As for the 727,274 Activision Blizzard restricted stock units he held before his varying options exercises and sales began on May 29, they were still in his account when the (ahem) storm of activity ended on June 2. He still has a vested interest in delivering value to shareholders.

So does company CEO Robert Kotick, who still directly held 124,880 common shares after his last sale in June. He also held 484,849 restricted stock units and 2.5 million "performance shares" -- shares that vest only if the stock gains a certain amount. From the latest proxy statement:

The performance shares will vest in 20% increments on each of July 9, 2009, 2010, 2011, and 2012, with another 20% vesting on December 31, 2012, in each case subject to our attaining the specified compound annual total stockholder return target for that vesting period. The performance targets increase for each vesting period. If we do not achieve the performance target for a vesting period, no performance shares will vest for that vesting period. If, however, we later achieve a performance target for a subsequent vesting period, then all of the unvested performance shares relating to prior vesting periods will vest on such subsequent vesting date. [Emphasis added.]

Presuming the performance targets aren't set too low, this is a pretty good deal for shareholders. But that's my take. Do you agree? Disagree? Log into CAPS today, and tell us how you would rate Activision Blizzard.

And if you want me to take a Foolish peek at the insider action of your favorite stock, email me here or use the comments box below. I'll write this column as often as you, our readers, demand.

Get your game on with related Foolishness:

• Mr. Softy lost some game recently.
• Here's a video game maker that rocks.
• Find out why you must be invested in the video game industry.