It's a time-honored tradition of the marketplace, the stock drops, the CEO walks (though only figuratively these days) on to the floor of the exchange with his first tranche of buy orders to be presented to the specialist in the pit for immediate execution. (Confidence is key?)
Does it 'work'? It's a tricky call, because although normally, significant increased buying will create upward price pressure, as the lowball orders are fufilled and prices need to increase to entice new sellers. But in this case, the buy order itself is inextricably linked to the news of the buy order, and if the latter is viewed as desperation (e.g. because the buy is seen as a token amount of shares) the stock can fall anyway, not just despite the support, but paradoxically because of it... Here's a fox article that tracked the major CEO inside buys back in 2011, and plotted the results...
Personally, I would rather see many, smaller buys from more mid to upper management (though these can be coerced or financed by a wink and a nod), than this tired CEO spectacle.
IPVMU Certified | 05/22/14 04:36pm
Don’t ALL public companies require executive leadership to purchase and own a certain amount of company stock AND also requires them to buy (at a nice discount) or sell stock (at a nice gain) depending on which way the price fluctuates. I know my company does. Maybe he just was behind in his percentage ownership and was using this price drop to catch back up.
Also leaders are granted some premium stock options that they are required to use or lose. I highly doubt he bought these shares anywhere near the lower limit of his stock option purchase price. Basically I am saying this doesn’t seem weird or out of the ordinary from what I see.