It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Take-Two Interactive Software, Inc. (NASDAQ:TTWO), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
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 logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.
The Last 12 Months Of Insider Transactions At Take-Two Interactive Software
In the last twelve months, the biggest single sale by an insider was when the Executive Chairman & CEO, Strauss Zelnick, sold US$2.7m worth of shares at a price of US$109 per share. That means that an insider was selling shares at slightly below the current price (US$123). We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. This single sale was just 10% of Strauss Zelnick's stake.
Over the last year, we note insiders sold 49500 shares worth US$5.9m. Insiders in Take-Two Interactive Software didn't buy any shares in the last year. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Take-Two Interactive Software Insiders Are Selling The Stock
Over the last three months, we've seen significant insider selling at Take-Two Interactive Software. Specifically, insiders ditched US$3.2m worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.
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. Take-Two Interactive Software insiders own about US$71m worth of shares. That equates to 0.5% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
What Might The Insider Transactions At Take-Two Interactive Software Tell Us?
Insiders sold stock recently, but they haven't been buying. Looking to the last twelve months, our data doesn't show any insider buying. But since Take-Two Interactive Software is profitable and growing, we're not too worried by this. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. We'd think twice before buying! Of course, the future is what matters most. So if you are interested in Take-Two Interactive Software, you should check out this free report on analyst forecasts for the company.
Of course Take-Two Interactive Software 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 currently account for open market transactions and private dispositions, but not derivative transactions.
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.