What happened
Snowflake (SNOW 3.69%) stock is seeing a substantial sell-off on Tuesday. The data-services specialist's share price was down roughly 6.9% in the daily session as of 11:30 a.m. ET, according to data from S&P Global Market Intelligence. Meanwhile, the Nasdaq Composite was down roughly 0.5%.
The driving factors behind Snowflake's outsized stock decline appear to be insider selling and charitable share donations. The software services provider published disclosures yesterday with the Securities and Exchange Commission (SEC) that a top executive and board member had donated and sold shares.
So what
Snowflake made a filing with the SEC revealing that the company Co-founder and President of Products Benoit Dageville had donated 37,090 shares to a charitable entity. The company also published a disclosure showing that Dageville had proposed to sell 6,591 shares at an approximate value of $944.75 million.
Another filing by the company yesterday showed that John McMahon had sold 1,000 shares of company stock at a price of $144.59 per share on April 6. Snowflake stock is now down roughly 4% year to date.
Now what
News that company insiders have sold shares is often interpreted as a bearish signal, but it's not necessarily a sign that a stock or business is on track for poor performance. Considering tax benefits and other potential catalysts, there are plenty of reasons why executives and board members sell or donate stock.
Investors would prefer to see a company's leadership purchasing stock rather than unloading it. However, there are some understandable explanations for why Snowflake shareholders might be jumpy right now.
SNOW PS Ratio (Forward) data by YCharts.
Trading at roughly 15.5 times expected forward sales, Snowflake stock has a highly growth-dependent valuation, and investors are broadly worried that macro pressures could drive new rounds of sell-offs for growth stocks. In particular, the market may be worried about new inflation data set to be released tomorrow.
If currency devaluation continues to run hot, the Federal Reserve could serve up another round of interest-rate hikes. And that could be bad news for growth stocks like Snowflake.
