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 before you buy or sell Provention Bio, Inc. (NASDAQ:PRVB), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
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 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'.
The Last 12 Months Of Insider Transactions At Provention Bio
Over the last year, we can see that the biggest insider purchase was by insider Anthony DiGiandomenico for US$304k worth of shares, at about US$12.16 per share. That means that even when the share price was higher than US$9.95 (the recent price), an insider wanted to purchase shares. 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. To us, it's very important to consider the price insiders pay for shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
Happily, we note that in the last year insiders paid US$1.0m for 197k shares. On the other hand they divested 7300 shares, for US$87k. Overall, Provention Bio insiders were net buyers last year. The average buy price was around US$5.29. We don't deny that it is nice to see insiders buying stock in the company. But we must note that the investments were made at well below today's share price. 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!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Insiders at Provention Bio Have Bought Stock Recently
There has been significantly more insider buying, than selling, at Provention Bio, over the last three months. Insiders spent US$776k on shares. But Jeffrey Bluestone sold shares worth US$87k. We think insiders may be optimistic about the future, since insiders have been net buyers of shares.
Insider Ownership of Provention Bio
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. Provention Bio insiders own about US$84m worth of shares. That equates to 21% 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.
So What Do The Provention Bio Insider Transactions Indicate?
It is good to see recent purchasing. And the longer term insider transactions also give us confidence. But we don't feel the same about the fact the company is making losses. Given that insiders also own a fair bit of Provention Bio we think they are probably pretty confident of a bright future. Of course, the future is what matters most. So if you are interested in Provention Bio, you should check out this free report on analyst forecasts for the company.
Of course Provention Bio 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.