It's often a wise strategy to watch the stock buying and selling patterns of company insiders. Sometimes, a ramp-up in selling by executives means that leadership is losing faith in their company. By contrast, a rush of share purchases can indicate that insiders are bullish on the company's future.
But interpreting those stock buys and stock sales isn't always straightforward.
Billionaire investor Peter Thiel was a co-founder of Palantir Technologies (PLTR +4.01%), and he has sold millions of shares of the data analytics giant worth billions of dollars in total over the past few years.
Some investors have seen this as a warning sign. But they're probably reading too much into those sales. Here's why.
Image source: The Motley Fool.
Thiel has sold millions of Palantir shares but still holds a 3% stake
Observant investors likely noticed that Thiel began selling large portions of his Palantir stake in early 2024. During that time, he unloaded tens of millions of shares.
His selling has continued since then. Most recently, in March of this year, he sold another 2 million shares, totaling about $290 million.
Thiel owned about 8% of Palantir back in 2020, but after all the selling, he has reduced his stake to about 3%.
Why Palantir investors shouldn't worry
All of this may seem troubling at first glance, but we should put his selling -- and his current stake -- into perspective.
First, Thiel has owned Palantir shares for more than two decades. That's a heck of a long time to hold a stock, and it's certainly a good indicator that he is a believer in Palantir and its highly profitable business.
NASDAQ: PLTR
Key Data Points
Second, Thiel's stake in Palantir remains very large. While he's reduced his position, he still has a 3% stake in the company. Based on Palantir's current market cap of about $423 billion, that stake is worth about $12.7 billion.
Forbes lists Thiel's net worth at about $33 billion, which means more than one-third of his net worth is held in Palantir stock -- even after selling tens of millions of shares. In short, his fortunes are still very much entwined with Palantir's success.
All of which suggests that while he has sold a significant amount of Palantir stock over the past couple of years, he hasn't lost faith in the company. Thiel is still the chairman of Palantir's board, and his approximately 69 million shares give him the largest stake in the company among individual investors, far surpassing even CEO Alex Karp's holdings of about 6.4 million shares. It's worth mentioning, though, that despite his stake's small size relative to the total market cap of the company, because much of Karp's stake is held in special share classes, he (and Thiel, and Palantir President Stephen Cohen) retain substantial voting power within the company.
Palantir shareholders shouldn't be worried about Thiel's recent selling. Instead, they should view it simply as a long-term investor booking some of the profits from the company's massive share-price gains.
