We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So we'll take a look at whether insiders have been buying or selling shares in 8common Limited (ASX:8CO).
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, rules govern insider transactions, and certain disclosures are required.
We don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
8common Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when insider Kok Fui Lau bought AU$95k worth of shares at a price of AU$0.043 per share. Even though the purchase was made at a significantly lower price than the recent price (AU$0.086), we still think insider buying is a positive. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
In the last twelve months insiders purchased 4.79m shares for AU$300k. But they sold 232560 for AU$28k. In total, 8common insiders bought more than they sold over the last year. They paid about AU$0.063 on average. We don't deny that it is nice to see insiders buying stock in the company. However, we do note that they were buying at significantly lower prices than today's share price. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
8common is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insider Ownership of 8common
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. 8common insiders own about AU$4.9m worth of shares. That equates to 35% of the company. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
What Might The Insider Transactions At 8common Tell Us?
The fact that there have been no 8common insider transactions recently certainly doesn't bother us. On a brighter note, the transactions over the last year are encouraging. Insiders own shares in 8common and we see no evidence to suggest they are worried about the future. I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.