We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Twilio Inc. (NYSE:TWLO), 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 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'.
Twilio Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Non-Employee Director, Byron Deeter, for US$8.0m worth of shares, at about US$107 per share. That means that even when the share price was below the current price of US$112, an insider wanted to cash in some shares. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. 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 18.7% of Byron Deeter's stake.
Over the last year we saw more insider selling of Twilio shares, than buying. 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!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insiders at Twilio Have Sold Stock Recently
There was substantially more insider selling, than buying, of Twilio shares over the last three months. We note insiders cashed in US$1.2m worth of shares. On the other hand we note Director Jeffrey Immelt bought US$1.0m worth of shares, as previously mentioned. Since the selling really does outweigh the buying, we'd say that these transactions may suggest that some insiders feel the company has been fully valued in recent months.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it's a good sign if insiders own a significant number of shares in the company. Twilio insiders own about US$1.3b worth of shares (which is 8.4% of the company). 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 Twilio Tell Us?
The stark truth for Twilio is that there has been more insider selling than insider buying in the last three months. Despite some insider buying, the longer term picture doesn't make us feel much more positive. It is good to see high insider ownership, but the insider selling leaves us cautious. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Twilio.
But note: Twilio 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.
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.