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 shareholders might well want to know whether insiders have been buying or selling shares in Rapid7, Inc. (NASDAQ:RPD).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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’.
Rapid7 Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when President Corey Thomas sold US$5.3m worth of shares at a price of US$21.01 per share. That means that an insider was selling shares at slightly below the current price (US$35.25). While sellers have a variety of reasons for selling, this isn’t particularly great to see. When an insider sells below the current price, it does tend to make us wonder about the current valuation. Please note, however, that this single sale was just 48.1% of Corey Thomas’s stake.
Over the last year, we note insiders sold 656.31k shares worth US$16m. In total, Rapid7 insiders sold more than they bought over the last year. They sold for an average price of about US$24.60. It’s not ideal to see that insiders have sold at around the current price. But we don’t put too much weight on the insider selling, since sellers could have personal reasons. 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.
Does Rapid7 Boast High Insider Ownership?
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. Rapid7 insiders own about US$215m worth of shares (which is 13% 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 Rapid7 Tell Us?
It doesn’t really mean much that no insider has traded Rapid7 shares in the last quarter. It’s heartening that insiders own plenty of stock, but we’d like to see more insider buying, since the last year of Rapid7 insider transactions don’t fill us with confidence. Of course, the future is what matters most. So if you are interested in Rapid7, you should check out this free report on analyst forecasts for the company.
But note: Rapid7 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.