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Corrections Corporation of America Message Board

  • drussian drussian Jul 29, 2013 9:34 AM Flag

    Insider Transaction

    This board is dead so I’m not expecting a ton of intelligent responses, but here it is nonetheless. I usually do not pay close attention to insider selling. I understand, people sell stock to buy furniture, homes, cars, airplanes, etc.. I understand when insiders sell one, two or three percent of their total holdings any time before or after earnings. I’ve been trading for over 15 years, so when I see CFO dump over ½ of his total shares all the way into earnings, that concerns me. It is probably tough to argue that the person that knows the most about the health of the company is CFO (controller might know just as much), correct? So, CFO of CCA sold 150,000 shares of CXW, starting on July 2 and ending July 17, a few weeks before earnings. This represents about 55% of his total holdings (data gathered from Yahoo, so might not be accurate). I might be overreacting, but is anybody else concerned here, that Todd Mullinger might know something, that we do not know? Lets try to analyze the possible outcomes of earnings, about one week from today –
    1) CCA report great earnings. CXW stock price goes higher – Question – Why did CFO dump a ton of his shares costing himself millions of dollars two weeks before earnings? Does this show solid decision making by a critical member of a public company? I don’t know…
    2) CCA misses their number. CXW stock tanks – No question stock holders will look back and start asking questions why CFO dumped shares going into earnings. SEC most likely will be interested in his transactions as well.
    What am I missing? Is there another scenario? This just doesn’t make a ton of sense. Either way, CFO does not look good based on these scenarios, so why sell? Maybe he is getting divorced, needs money, or what? Why not wait until right after earnings and sell then? I just can’t get my arms around this. Thoughts?

    Sentiment: Hold

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    • Interesting my post has been deleted by Yahoo, so here it is again. Here is what I've done after my last post and seeing CFO of CCA dump another 75K shares (total of 225K shares sold in July) -
      1) Contacted CCA client relations to get an explanation for internal procedures tracking large insider sales. So response. Not very good sign
      2) Submitted inquiry into SEC to understand if there are any rules in regards to these types of transactions. Will let you know the outcome
      If I was an investor I'd be very concerned about CFO selling most of his shares into earnings. Thoughts?

      • 1 Reply to drussian
      • The CFO exercised options and sold upon exercise. This is a common event with insiders--usually not a big red flag. He still has 100K shares. Maybe his wife wanted a bigger house. However, if he was bullish on the company, he would hold seems to me. So, the CFO selling so many shares should raise some caution. Insider buys is a stronger signal to the upside, but not 100%. The CFO sold to diversify holdings, most likely. That is the conservative approach.

        That said, I hope CXW goes up after earnings. The chart looks like the stock bottomed. However, the governments that pay CXW are squeezed for money and that will hurt CXW. The big growth, boom times for CXW are behind, seems to me. Also, the market is due for a breather after hitting an all time high on the DOW.

        Sentiment: Hold

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