Palantir Technologies Inc. (NASDAQ: PLTR) stock has dropped about 2.5% in the last month, leading some critics to believe a correction is overdue due to the stock’s overvaluation.

Concerns about insider selling have arisen, but most trades were part of a Rule 10b5-1(c) plan to prevent insider trading, dating back to the Securities Exchange Act of 1934.

Palantir’s high stock-based compensation (SBC) has raised investor concerns, with $1.57 billion in SBC expenses in the past year, a 30% increase year-over-year.

Investors worry about Palantir’s high SBC affecting valuation, dilution, and adjusted earnings, potentially eroding shareholder value and obscuring true compensation costs.

Insider selling combined with high SBC is seen as a negative signal, as insiders benefit while shareholders’ value may be eroded.

Insiders selling stock is often a way to diversify wealth or fund personal expenses, but Palantir’s recent partnerships with Lumen Technologies and Lear have brought positive impacts, easing concerns.

The partnerships with Lumen and Lear have resulted in significant cost savings and value creation, showcasing the potential for growth and positive outcomes for Palantir.

Read more at Nasdaq: Palantir Insider Selling: Risk Signal or Normal Activity?