Selling by Groupon insiders, like big news, is …

SAN FRANCISCO — Every stock trade involves a buyer and seller. So when retail investors are getting ready to buy a stock, it's worth asking why the other party wants to sell.

That's especially the case if the seller is a company insider.

Insiders always find out about important company news before the general public because for executives, early investors and board members, it's simply their job.

That's why before retail investors pull the trigger on a transaction, it's always useful to check the most recent buy-to-sell ratios for insiders of public companies, using data listed on the websites of stock markets such as NASDAQ and New York Stock Exchange.

When combined with fundamental analysis of a company's business and a technical analysis of its stock price, the exercise can yield a more-informed investing decision for non-professionals.

It can also tell you the story behind recent trading activity in a stock.

Take the insider sales of Groupon recently.

During the three months ended in late October, the ratio of insider sales to purchases of Groupon shares had skyrocketed to 100-to-1.

Insiders — including executives, board members and early investors — sold a whopping 301.7 million Groupon shares during that time while buying just 3.2 million.

On Sept. 13, New Enterprise Associates, a venture capital firm that was among the first to invest in the online coupon site, unloaded an unusually large number of shares:

The 20 million-share block represented 23% of the firm's stake as of Feb. 13, when NEA filed documents with securities regulators showing ownership of 87 million Groupon shares.

That type of sale does at least two things to the trading environment for an individual stock.

First, it raises concerns in the minds of people who follow it because the firm is a top-tier venture capital partnership with a long list of successful investments.

The partnership first invested $4.8 million in early 2008, during Groupon's fir! st venture capital funding round, and put in many millions of dollars more in several later rounds in 2009, 2010 and early 2011.

By mid-2011, when Groupon filed the initial paperwork for its IPO, New Enterprise Associates owned 14.7% of the company's Class A common stock.

The offering, in November 2011, valued Groupon at $12.8 billion. Its shares ended trading last week worth $6 billion.

Because NEA had turned tens of millions into more than $1 billion with its Groupon investment, its large share sale in early September raised a simple question: Why then?

Given that insiders can run afoul of securities rules by discussing company details just prior to a quarterly report, that's a question few can answer now.

Regardless of the reason behind it, a sale of that size pressures the asking price of a stock by flooding the market with shares.

That's what happened with Groupon, as the stock price dropped 22% between the date of the sale and the close of trading Oct. 31.

Also during the third quarter, Wall Street analysts were cutting their profit expectations for the company.

By early October, the average earnings estimate for Groupon had fallen to 1 cent a share, from an average expectation of 5 cents in July. The company's full-year profit estimates for 2013 were also cut, to an average of 12 cents a share from 17 cents.

All those figures, by the way, ignore Groupon's large and recurring charges for stock-based compensation.

Groupon shares bounced back about 8% Friday, after the company unveiled a new website.

Interest in the stock likely will rise during the run-up to its earnings announcement on Thursday.

That just happens to be the same day Twitter is expected to price its IPO, which means there's a good chance the news of Groupon's third-quarter results may get buried.

What might all those selling insiders know about Groupon's third-quarter financial report, and what will that information do to its stock price once it's shared w! ith the p! ublic?

We'll all know more later this week, after Groupon's announcement.

Given the behavior of company insiders, it could be big.

John Shinal has covered tech and financial markets for 15 years at Bloomberg, BusinessWeek, the San Francisco Chronicle, Dow Jones MarketWatch, Wall Street Journal Digital Network and others.