What happened

By now you've heard the news: Intelsat (NYSE:I) insiders are cashing out anywhere from 10 million to 11.5 million of the Intelsat shares they own, and other investors are spooked. Yesterday, Intelsat stock closed down about 10% as shareholders panicked over the implications of the massive secondary sale of stock. Today, Intelsat seemed set to lose another 10% at one point -- before recovering to close the day down "only" 5.2%.

So what

So why are investors still selling? That's actually an excellent question.

The obvious answer is: They're still scared. The fact that 8.4% of Intelsat's shares outstanding are basically up for bid would seem to create a risk that the stock's price now will fall steeply. But will it really?

Glowing red arrow going down against a red background.

Intelsat shares keep going lower and lower. Image source: Getty Images.

I'm not so sure. Consider this: When Intelsat announced the large secondary offering by its "Selling Shareholders" yesterday, it noted that said insiders were looking for a purchase price of $25.75 on their shares. Admittedly, that's less than the $26.22 Intelsat shares were selling for Thursday, which explains why at least some investors might have felt compelled to do at least some Intelsat stock selling today. However, the Selling Shareholders' desired sales price still is more than the $24.87 that Intelsat stock fell to on Friday.

This suggests that outside investors may have overreacted to news of the sale and are now valuing their shares below what the Selling Shareholders still think it is worth.

Now what

What is the right price for Intelsat stock? Is it the $25.75 the Selling Shareholders are demanding, the $24.87 that today's outside shareholders were willing to accept, or something in between?

That's really hard to answer. Intelsat is unprofitable today, and most analysts don't even expect to see Intelsat report an actual GAAP profit before 2021 at the earliest. That means investors probably have to wait another three years before Intelsat has a positive price-to-earnings ratio to measure against.

Until Intelsat does turn profitable and makes its shares a bit easier to value, I expect this company will remain one of the more volatile stocks on Wall Street.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.