Heavy insider selling while price is still elevated. Insiders see deterioration the market doesn't yet.
Net insider activity sits in the bottom quintile — meaning officers and directors are selling heavily — while the stock price is still in the top 40% of its momentum distribution. Selling into strength is the textbook sign of insiders cashing out before bad news hits.
Seyhun 1998 showed that the top decile of net insider selling predicts ~8% underperformance over 12 months. Cohen-Malloy-Pomorski 2012 separated "routine" 10b5-1 scheduled sales from "opportunistic" — the alpha is concentrated in opportunistic sales outside of earnings windows. Our pattern excludes the post-earnings window to focus on the opportunistic cohort.
Founder-led companies sometimes have scheduled sales for diversification or estate planning that look heavy on aggregate but are mechanical. Cross-check by looking at the actual Form 4 filings: are sales clustered around earnings releases (routine) or scattered through the quiet periods (opportunistic)?