We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Provention Bio, Inc. (NASDAQ:PRVB).
What Is Insider Selling?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. 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'.
Provention Bio Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when insider Anthony DiGiandomenico bought US$304k worth of shares at a price of US$12.16 per share. That implies that an insider found the current price of US$14.99 per share to be enticing. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. In this case we're pleased to report that the insider purchases were made at close to current prices.
In the last twelve months insiders purchased 122.63k shares for US$1.2m. But insiders sold 7300 shares worth US$87k. In total, Provention Bio insiders bought more than they sold over the last year. The average buy price was around US$9.60. To my mind it is good that insiders have invested their own money in the company. However, you should keep in mind that they bought when the share price was meaningfully below today's levels. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Provention Bio is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Provention Bio Insiders Bought Stock Recently
It's good to see that Provention Bio insiders have made notable investments in the company's shares. Not only was there no selling that we can see, but they collectively bought US$76k worth of shares. This could be interpreted as suggesting a positive outlook.
Insider Ownership of Provention Bio
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. It's great to see that Provention Bio insiders own 21% of the company, worth about US$151m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
What Might The Insider Transactions At Provention Bio Tell Us?
The recent insider purchases are heartening. We also take confidence from the longer term picture of insider transactions. But we don't feel the same about the fact the company is making losses. Once you factor in the high insider ownership, it certainly seems like insiders are positive about Provention Bio. Looks promising! If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
But note: Provention Bio may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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.
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