Commonwealth Bank of Australia (ASX: CBA) issued a notice to the market on Monday stating that the bank's chief executive officer, Ian Narev, had sold 8,250 ordinary shares worth just over $751,000.
Of course, there are numerous reasons why an executive might sell shares, such as needing money to pay for a home or repay a large debt, but it can also be a signal that the stock has simply become overpriced.
The stock has soared in recent years on the back of low interest rates and the market's appetite for high-yield dividend stocks. On Monday, the shares traded within 4 cents of an all-time high at $93.92 and many analysts are sceptical as to whether they can actually climb higher. After all, Commonwealth Bank is already one of the most expensive bank stocks in the world.
It's also worth remembering Narev's sobering warning about the economy, which he delivered in his bank's earnings call last week. He said: "The volatility of the global economy continues to undermine confidence, particularly the impact of lower commodity prices on national revenue… Weak confidence is a significant economic threat. Businesses need the certainty to invest to create jobs, and households need a greater feeling of security."
Should these threats play out, Australia's big four banks could be the first to take a hit.
Narev sold his shares for an average price of $91.03, which is 2.7% below Monday's closing price. While no reason was given as to why he sold, investors may want to consider selling a portion of their own Commonwealth Bank holdings given the exuberant price at which the bank is currently trading.
