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 we'll take a look at whether insiders have been buying or selling shares in Andromeda Metals Limited (ASX:ADN).
Do Insider Transactions Matter?
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 don't think shareholders should simply follow insider transactions. 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'.
Andromeda Metals Insider Transactions Over The Last Year
The insider, Robert Connolly, made the biggest insider sale in the last 12 months. That single transaction was for AU$192k worth of shares at a price of AU$0.011 each. That means that even when the share price was below the current price of AU$0.047, an insider wanted to cash in some shares. 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 16.8% of Robert Connolly's stake. The only individual insider seller over the last year was Robert Connolly. Notably Robert Connolly was also the biggest buyer, having purchased AU$232k worth of shares.
Robert Connolly sold a total of 44.7m shares over the year at an average price of AU$0.0072. 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!
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Insider Ownership of Andromeda Metals
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Andromeda Metals insiders own about AU$13m worth of shares. That equates to 22% 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.
What Might The Insider Transactions At Andromeda Metals Tell Us?
It doesn't really mean much that no insider has traded Andromeda Metals shares in the last quarter. Our analysis of Andromeda Metals insider transactions leaves us cautious. The modest level of insider ownership is, at least, some comfort. To put this in context, take a look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow .
Of course Andromeda Metals 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.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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.