In a move that has caused more than a bit of unease among many investors, insiders at some of the hottest private and publicly traded Internet companies got rid of substantial personal stock stakes before the March slump began. Many believe that this reveals a lack of confidence in their stock prices and see it as an opportunistic move that, while not particularly illegal, borders on unethical.

“Individuals selling before going public is always a bad sign,” said Mr Sebastian Thomas, a portfolio manager at Allianz Global Investors. “If you believe in the business, why would you take out money at what is presumably a lower valuation in the private market?”

Executives and directors at many large tech companies have been steadily selling shares due to the fact that the lockups which prevented insider sales after their 2012 IPOs has expired.

In the last six weeks shares of these “software as a service” companies have fallen upwards of 45% from their peak.

“It was a great deal for them – they took advantage of a big run-up,” said one tech investor.

Some corporate insiders actually had no discretion over the timing of these transactions as many of the sales were made through prearranged stock trading plans. The fact that the tech stock slump wiped out most of the gains made during the last six months also left share prices at about the level they were selling for during much of the past year.

One of the biggest sellers was the  chief executive of Amazon, Jeff Bezos, who saw his total  sales rise to over $1 billion in the last six months after raising $351 million in February. That’s more than three times the amount he raised in 2013 but, since then, the shares of Amazon have fallen back 11%.

The C00 of Facebook, Sheryl Sandberg, sold over half of her stake in that company’s IPO a little less than two years ago, something that benefited greatly from the steady rise in Facebook’s stock since about the middle of the previous year. Her disposals however began when Facebook’s stock was still at $21.08 because of a prearranged plan in place, meaning that a majority of those sales were made when Facebook’s stock price was well below its $58.33 peak price.

Research firm PrivCo reported that approximately 11% of fundraising rounds for private companies last year had at least some selling by insiders, in comparison to 6% from three years ago.

PrivCo’s Sam Hamedah said that  “The old adage in Silicon Valley? used to be that founders didn’t get to cash out until all investors got to cash out, “ adding that “Fierce competition among venture capitalists to back the hottest companies has made them more willing to countenance insider sales.”

Backers of King Digital Entertainment were among some of the tech insiders to take money out of their company before it went public. King Digital is the maker of the extremely popular Candy Crash Saga game and, before their company went public, $504 million in dividends were paid out to them. Recently shares of their company ended at 22% below that initial IPO price from March.

“It’s a yellow flag with regard to what’s really going on with the company,” said Thomas. “It makes you worry what they are trying to sell to investors.”

Filed under: Investing

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