Executives, directors, and members of the Koss family raised more than $ 44 million in Koss Corp. stock last week. sold as stocks rose from the buying frenzy of private investors.
Members of the Koss family, who own approximately 75 percent of the Milwaukee-based headphone manufacturer, sold $ 31 million in shares, according to the Securities and Exchange Commission.
The records indicate they were sold at prices between $ 19 per share and over $ 60 per share. The company’s shares traded below $ 4 per share before becoming popular with retailers, rising to over $ 120 per share on Jan. 28.
Revenue of $ 31 million is greater than the company’s total market value – at around $ 26 million – prior to the increase in its stake. With Koss shares falling 26% on Thursday afternoon, their current market cap is more than $ 143 million.
Directors and other executives sold a total of $ 13 million in shares. When reached by CNBC, a company spokesman declined to comment.
Nine insiders sold stocks
Nine of the company’s internal shareholders sold shares. Two of them sold under 10b5-1 plans, which is a pre-planned sale, and also sold stocks outside of their plans. The other seven sold the shares regardless of a stock sell-off plan, so “all nine were selling at least something outside of the regular plans,” said Ben Silverman, research director at InsiderScore.
Koss has become a favorite of retailers looking for “short squeeze” opportunities beyond GameStop. The company’s stock had a short interest of over 35% prior to its hike, which put it on many of the most shortened stocks lists. By buying the stocks, traders hoped to force short sellers to take their positions at a loss and go out of business.
Typically, when an investor shorts a stock, they borrow the stock with the assumption that the price will fall. Then the investor can buy the stock at a profit.
The high sales by insiders and the wealth they generate suggest, however, that in many cases it is the large insiders and large shareholders who benefit from trading rather than the small private investors.
The stock price increase also came at an opportune time for the insiders eager to sell, according to Silverman. The company reported profits on Jan. 28 and filed its 10Q the following day, allowing insiders to sell after the profit during their trading window on Monday.
“It’s kind of lucky for them that the timing – their profit notification – opened the trading window as normal business and they were able to take advantage of the volatility,” said Silverman.
He said the post-earnings window also explains why they likely didn’t sell when the stock was above $ 100 on Jan. 28.
While the sales may catch the SEC’s attention, Silverman said shareholders may have just sold at what they believed to be an extraordinarily high price that they had no control over.
“If the market wants to bid the stock price above the intrinsic value of the company, that is the market’s business,” said Silverman. “These guys took advantage of it. It’s not surprising.”