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Why Insiders?

We may have heard the phrase “company insider” before but it may not be clear what it means. It definitely does not mean insider trading, which is something entirely different.

Why should you care if your prospect is an insider?

Because it can mean that the prospect may have the wealth capacity… and it’s public knowledge.

What is an insider?

A public company insider is either a senior officer or a director of a publicly traded company. Insiders also include any person or organization/company that owns over 10% of the company’s shares. These are typically the top people at a company and its largest shareholders.

So what?

That means their compensation and stockholdings are public knowledge. Yes, that means the insider’s compensation, including cash and benefits as well as their stockholdings and any derivatives, are publicly available. That’s really handy for figuring out someone’s wealth capacity. It’s generally why researchers do the Snoopy dance when they find one.

However, it’s only part of the picture. Insiders only have to report the stock for companies where they are insiders. So if they hold stock elsewhere and do not serve as a director, an senior officer, or own 10% of the stock, they do not have to report that information.

So the person’s compensation package is a part of a larger picture. But it’s a big one. Research often has to deal with estimated salary ranges, but they can use real numbers with insiders.

Granted, figuring out what a person’s compensation and stockholdings/derivatives can be a lot of work. Those proxy statements containing the information do not make it easy to understand, but that’s why prospect researchers are there to help untangle everything to give you a good estimated wealth capacity for your prospect.

You can also learn a little bit about a person’s philanthropy too. Sometimes on Form 4s, which is where people report changes in their stockholdings, you can find that they gifted stock to a nonprofit or a trust. They also may have a need to offset tax liabilities, which can be helped with grants of stock or cash. That’s super helpful when thinking about a solicitation.

So the next time you see someone defined as an insider, that’s someone you might want to take a closer look at when cultivating prospects in your portfolio.

Workshops

Want to learn more about insiders and the stock market? Consider signing up for the Prospect Research Institute’s workshop series:

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