Palantir Insider Selling: Risk Signal or Normal Activity?

Key Points

• Insider selling in Palantir stock is largely tied to 10b5-1 trading plans, not bearish signals.
• Heavy stock-based compensation raises dilution and valuation concerns for investors.
• New deals with Lear and Lumen highlight Palantir’s AI-driven growth potential.

Palantir Technologies Inc. NASDAQ: PLTR stock is down about 2.5% in the last 30 days. Some long-time critics of the company and the stock’s current valuation believe this could be the beginning of what they believe is a long-overdue correction.

Their concerns aren’t without merit. Based on traditional metrics, Palantir is very overvalued.

However, a recent concern is the amount of sales being made by company insiders. This can be a dangerous news item for investors to digest without context.

Why Palantir Insider Selling Matters for Investors

The primary concern about insider selling is that it could be a form of insider trading. That is, executives or board members of a company sell shares because they know some material information that will cause a stock drop in value.

However, almost all of the recent trades in PLTR stock were part of a Rule 10b5-1(c) plan. These plans are expressly set up to prevent insider trading. Rule 10b5-1 goes back to the adoption of the Securities Exchange Act of 1934.

The rule “provides an affirmative defense to insider trading for individuals and issuers that trade stocks under plans entered into in good faith at a time when the individual or issuer does not possess material nonpublic information.”

The Palantir Insider Selling page on MarketBeat shows you the trades that have occurred and allows you to see the SEC Form 4 showing whether the trade was part of a Rule 10b5-1(c) plan.

Palantir’s Heavy Stock-Based Compensation and Dilution Risk

Since going public in 2020, many investors have expressed concern over the amount of stock-based compensation (SBC) issued by Palantir. Stock-based compensation allows companies to retain talent without ample cash outlays, helping to preserve capital for business operations and growth. 

Granting employees partial ownership in the company also helps align their interests with those of shareholders.

On the downside, SBC increases the number of outstanding shares, reducing the value of existing shares and making a company’s stock seem more expensive on a per-share basis.

While SBC is standard among software companies and companies in the tech sector in general, Palantir’s use of it is higher than that of many companies. As of June 2025, Palantir’s trailing 12-month SBC expenses totaled $1.57 billion, a 30% year-over-year (YOY) increase.

Investor Concerns: Valuation, Dilution, and Adjusted Earnings

There are three valid reasons for investors to be concerned about Palantir’s use of SBC.

• The company’s high share count makes its price-to-earnings ratio extremely high, fueling concerns about long-term value, especially if growth fails to outpace dilution.

• Investor returns are threatened if SBC continues at such a high rate, as investors' proportional ownership in the business drops even if the company grows.

• Some claim Palantir’s exclusion of SBC in “adjusted earnings” presentations can obscure the true compensation cost, making financials seem artificially stronger.

That’s why insider selling combined with high stock-based compensation is frequently referred to as a negative signal. The belief is that company insiders are benefiting while eroding shareholder value.

Understanding Insider Selling: Why Palantir Executives Take Profits

The keyword in stock-based compensation is “compensation.” A company’s stock growth is a financial benefit to an employee's compensation package. It’s logical that with a stock that’s enjoyed the run-up of Palantir, insiders would look to take some profits.

In fact, the most common reason insiders sell shares is to diversify their personal wealth (outside of the company’s stock), or to fund personal expenses (life events, taxes, etc.).

This is where the 10b5-1 plan designation is essential. These sales are routine, predictable, and most importantly, pre-planned. That means they reflect personal financial planning rather than believing that the company’s stock will go down.

Do Palantir’s New AI Partnerships Change Insider Selling Risks?

One more thing to consider. In the last week, Palantir struck two major deals that hardly qualify as sell-the-news events.

The company announced a new partnership with Lumen Technologies NYSE: LUMN. Lumen is transforming its traditional telecom business into a next-generation technology company to help customers meet their evolving AI-ready needs.

Lumen is using Palantir’s Foundry and AIP programs to unlock new value and is already reporting an enormous impact from the partnership.

The company also expanded its partnership with the global automotive leader, Lear. The company is using Palantir’s Foundry, AIP, and Warp Speed platforms, which Lear credits for generating $30 million in cost savings in the first half of 2025 alone.