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Should You Be Worried About Insider Transactions At Signature Bank (NASDAQ:SBNY)?

Simply Wall St

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 shareholders might well want to know whether insiders have been buying or selling shares in Signature Bank (NASDAQ:SBNY).

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 don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'

See our latest analysis for Signature Bank

The Last 12 Months Of Insider Transactions At Signature Bank

Over the last year, we can see that the biggest insider sale was by the Senior VP & CTO, Michael Sharkey, for US$3.1m worth of shares, at about US$125 per share. That means that even when the share price was below the current price of US$129, an insider wanted to cash in some shares. We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was only 28.8% of Michael Sharkey's holding. Notably Michael Sharkey was also the biggest buyer, having purchased US$1.3m worth of shares.

Over the last year, we can see that insiders have bought 29751 shares worth US$1.3m. But insiders sold 69521 shares worth US$9.1m. All up, insiders sold more shares in Signature Bank than they bought, over the last year. The sellers received a price of around US$131, on average. It's not particularly great to see insiders were selling shares at below recent prices. Of course, the sales could be motivated for a multitude of reasons, so we shouldn't jump to conclusions. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

NasdaqGS:SBNY Recent Insider Trading, April 10th 2019

I will like Signature Bank better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Insiders at Signature Bank Have Sold Stock Recently

The last quarter saw substantial insider selling of Signature Bank shares. Specifically, insiders ditched US$3.3m 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 directors think that the shares are a bargain.

Does Signature Bank 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. A high insider ownership often makes company leadership more mindful of shareholder interests. Signature Bank insiders own 2.7% of the company, currently worth about US$190m based on the recent share price. 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 Signature Bank Insider Transactions Indicate?

Insiders sold stock recently, but they haven't been buying. Despite some insider buying, the longer term picture doesn't make us feel much more positive. On the plus side, Signature Bank makes money, and is growing profits. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Signature Bank.

Of course Signature Bank may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

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 editorial-team@simplywallst.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.