BlackLine insiders have sold $326.0 million worth of stock since March 15th. It’s worth taking a closer look at the company with the stock trading at such a rich valuation.
Insider Selling: BlackLine
A number of insiders have been selling shares of BlackLine (Nasdaq: BL) according to recent form 4 filings with the SEC. Notable insiders include Therese Tucker (Founder & CEO), William Griffith (Director), Mario Spanicciati (CMO), and a Silver Lake fund, as shown in the table below. Total insider selling totaled 8 million shares worth $326.0 million, or approximately 15.3% of BlackLine’s total market capitalization.
|Insider Trading||Relationship||Date||#Shares||Value ($)|
|William Griffith||Director||Mar 15||2,000,000||$81,500,000|
|Mario Spanicciati||Chief Marketing Officer||Mar 15||700,000||$28,525,000|
|Therese Tucker||Founder & CEO||Mar 15||340,000||$13,855,000|
|Silver Lake||10% Owner||Mar 15||4,960,000||$202,120,000|
Silver Lake’s large $202 million sale is what initially caught my eye. According to its website, Silver Lake is a leader in technology investing, with about $39 billion in combined assets under management and a team of approximately 100 investment and value creation professionals located around the world.
The ACAP Strategic Fund's managers see a "significant scarcity of attractive asset allocation choices globally," but also a strong environment for fundamental stock picking. Q2 2021 hedge fund letters, conferences and more According to a copy of the fund's second-quarter investor update, which ValueWalk has been able to review, its managers currently hold a balanced Read More
The investment firm previously owned approximately 12.5 million shares of BlackLine before cutting its stake in the company by nearly 40%. However, Silver Lake is still the largest single shareholder in the company owning about 14% of the outstanding shares.
Is BlackLine Overvalued?
BlackLine provides financial accounting close solutions delivered as a Software as a Service in the United States and internationally. Its solutions enable its customers to address various aspects of their financial closing process, including account reconciliations, variance analysis of account balances, and journal entry capabilities. The company was founded in 2001 and is headquartered in Los Angeles, California.
The company’s shares last traded at $39.47 as of Thursday, up 39.8% over the last year and 14.3% in the last three months. While the stock has made impressive gains, the recent insider transactions could signal a troubling road ahead for shareholders.
Finbox.io’s average fair value estimate of $25.10 implies -36.4% downside and is calculated from 4 valuation models as shown in the table below. Each analysis uses consensus Wall Street estimates for the projections when available.
|Analysis||Model Fair Value||Upside (Downside)|
|10-yr DCF Revenue Exit||$25.04||-36.6%|
|5-yr DCF Revenue Exit||$30.56||-22.6%|
|Peer Revenue Multiples||$23.36||-40.8%|
|5-yr DCF EBITDA Exit||$21.45||-45.7%|
How Should You Interpret This?
While executives are always happy to tell you all the reasons why their stock is a buy, their actions can tell a different story about the company’s future prospects. A trend of selling activity may indicate that insiders think the stock is going down over the upcoming time period, and are trying to sell before the price falls.
Keep in mind that insider activity is only one aspect of stock research and that there are other important items to consider. I recommend you continue to research BlackLine to get a more comprehensive view of the company’s fundamentals by looking at:
Valuation Metrics: what is BlackLine’s short ratio and how does it compare to its publicly traded peers? It represents the percentage of total shares outstanding that is being shorted. View the short ratio here.
Risk Metrics: what is BlackLine’s asset efficiency? This ratio measures the amount of cash flow that a company generates from its assets. View the company’s asset efficiency here.
Efficiency Metrics: is management becoming more or less efficient in creating value for the firm? Find out by analyzing the company’s return on invested capital ratio here.
Author: Andy Pai
Expertise: financial modeling, mergers & acquisitions
Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights:
- Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores.
- Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets.
Andy can be reached at [email protected]
As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.