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 we'll take a look at whether insiders have been buying or selling shares in WuXi Biologics (Cayman) Inc. (HKG:2269).
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 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'.
The Last 12 Months Of Insider Transactions At WuXi Biologics (Cayman)
The CEO & Executive Director, Zhisheng Chen, made the biggest insider sale in the last 12 months. That single transaction was for HK$58m worth of shares at a price of HK$71.97 each. That means that an insider was selling shares at slightly below the current price (HK$80.70). When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. This single sale was just 39.8% of Zhisheng Chen's stake.
All up, insiders sold more shares in WuXi Biologics (Cayman) than they bought, over the last year. The chart below shows insider transactions (by individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
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WuXi Biologics (Cayman) Insiders Are Selling The Stock
Over the last three months, we've seen significant insider selling at WuXi Biologics (Cayman). In total, Zhisheng Chen sold CN¥58m worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.
Does WuXi Biologics (Cayman) Boast High Insider Ownership?
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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. WuXi Biologics (Cayman) insiders own about HK$4.0b worth of shares (which is 4.0% 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.
So What Do The WuXi Biologics (Cayman) Insider Transactions Indicate?
An insider sold WuXi Biologics (Cayman) shares recently, but they didn't buy any. Zooming out, the longer term picture doesn't give us much comfort. On the plus side, WuXi Biologics (Cayman) makes money, and is growing profits. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for WuXi Biologics (Cayman).
Of course WuXi Biologics (Cayman) 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.