Stock Prices Follow Stories, but Insiders Know the Truth

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"Why is a founder selling at lifetime lows?"

That's what I wondered when I saw Ola back in the headlines - not for any product launch or a turnaround story.

This time, it's about its founder, Bhavish Aggarwal, selling a part of his personal holding. The sale will help release 3.93% of pledged shares and fully repay a promoter level loan of Rs 2.6 bn.

Let me be clear at the outset. I have nothing against promoters monetizing small portions of their stake over time. Insider selling is not a crime, nor is it always a warning sign.

There are plenty of examples where founders sold shares and the stock continued to create massive wealth. Page Industries is a classic case - multiple rounds of insider selling, and yet a long journey as a multibagger.

So why did the market flinch this time?

It was because of the timing.

Ola's stock is trading near lifetime lows. And that makes all the difference.

Just over a year ago, Ola, loss making then (and still loss making now), came to the market with an IPO priced at Rs 76 per share. When asked about valuation, Agarwal confidently said the issue was priced cheaply, leaving money on the table so public investors could feel excited about the opportunity.

Fast forward to today. The same promoter is selling shares at more than a 50% discount to that IPO price.

Correction aside, that earlier statement rings hollow in light of the promoter selling.

I've said this before, and I don't mind repeating it. IPOs often offer the worst deals for retail investors. Especially when promoters are using the offer for sale route to offload their own shares. Yet every bull market brings with it a strange obsession with the next hot listing.

This reminds me of a tweet from market veteran Shankar Sharma that I strongly agree with: "This bull market will go down in Indian history as the biggest cash transfer from the poor to the rich."

He's blunt, and right. Most IPOs are not wealth creation events. They are wealth extraction events.

Think about the structure of an IPO. On one side of the table sit insiders - promoters and early investors, selling a part of their stake. On the other side sits the retail investor, often buying the story at its most polished moment.

Seasoned investors do the opposite. They wait. They observe. And instead of tracking insider selling, they track insider buying. They prefer to ride alongside promoters when promoters are putting their own money back into the business.

As Peter Lynch put it so simply: Insiders sell for many reasons, but they buy for only one. They believe the stock will go up.

That single insight can make a world of difference to long term outcomes in the market.

The recent correction has been particularly unforgiving to loss making companies that were riding the growth narrative. For many of them, no correction is deep enough - unless you're consciously playing in the speculative zone.

But here's the other side of the story.

Corrections don't just destroy value. They also create it.

Quietly, in the background, better prices have emerged in profitable companies. Prices that insiders themselves find attractive enough to deploy their personal capital in the open market.

One such example from the December month is Anant Raj, that is sending a signal completely opposite to Ola.

This is a real estate development and construction company where promoters have invested over Rs 108 million of their personal money this month, buying shares from the open market at an average price of around Rs 507.

That's close to the current market price, and notably well below the QIP price of Rs 662 that institutional and smart investors have paid this quarter itself for a stake.

The company today is almost debt free and has reported growth across key financial metrics. Add to that the powerful tailwind of India's expanding data center ecosystem - an opportunity Anant Raj is already tapping into. And you have a business worth keeping an eye on.

This is not a recommendation. Think of it as a watchlist idea, rooted in one simple principle: pay attention to what insiders do with their own money.

Remember - Prices talk, stories shout, but the insider money whispers the truth.

So, when the next big story comes along, which signal will you choose to follow - the narrative, or the insider money?

If you want to know more about such companies - join me in an online discussion about insider ideas.

Warm regards,


Richa Agarwal
Editor and Research Analyst, Hidden Treasure
Quantum Information Services Private Limited (Research Analyst)