We often see insiders buying up shares in companies that perform well over the long term. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So we’ll take a look at whether insiders have been buying or selling shares in Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD).
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. 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 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’.
Ironwood Pharmaceuticals Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by Senior VP Mark Currie for US$3.6m worth of shares, at about US$13.29 per share. That means that even when the share price was below the current price of US$13.62, an insider wanted to cash in some shares. While their view may have changed since they sold, this isn’t a particularly bullish sign. 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 35% of Mark Currie’s stake.
Over the last year, we note insiders sold 280.68k shares worth US$3.7m. Over the last year we saw more insider selling of Ironwood Pharmaceuticals shares, than buying. They sold for an average price of about US$13.29. We don’t gain much confidence from insider selling near the recent share price. Since insiders sell for many reasons, we wouldn’t put too much weight on it. 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!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insiders at Ironwood Pharmaceuticals Have Sold Stock Recently
Over the last three months, we’ve seen significant insider selling at Ironwood Pharmaceuticals. Specifically, insiders ditched US$3.7m 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.
Does Ironwood Pharmaceuticals 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. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 2.4% of Ironwood Pharmaceuticals shares, worth about US$50m. 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 Ironwood Pharmaceuticals Insider Transactions Indicate?
Insiders sold Ironwood Pharmaceuticals shares recently, but they didn’t buy any. And there weren’t any purchases to give us comfort, over the last year. Insiders own shares, but we’re still pretty cautious, given the history of sales. So we’d only buy after careful consideration. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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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.