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We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So shareholders might well want to know whether insiders have been buying or selling shares in Reverse Corp Limited (ASX:REF).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
We don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.'
The Last 12 Months Of Insider Transactions At Reverse
Over the last year, we can see that the biggest insider sale was by the , James Manning, for AU$115k worth of shares, at about AU$0.031 per share. That means that even when the share price was below the current price of AU$0.042, an insider wanted to cash in some shares. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was 100% of James Manning's holding. Notably James Manning was also the biggest buyer, having purchased AU$176k worth of shares.
All up, insiders sold more shares in Reverse than they bought, over the last year. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
Reverse Insiders Are Selling The Stock
Over the last three months, we've seen significant insider selling at Reverse. Specifically, insiders ditched AU$184k worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.
Does Reverse Boast High Insider Ownership?
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. It's great to see that Reverse insiders own 42% of the company, worth about AU$1.7m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Reverse Tell Us?
Insiders sold Reverse shares recently, but they didn't buy any. And our longer term analysis of insider transactions didn't bring confidence, either. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. 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.
Of course Reverse may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.