It is not uncommon to see companies perform well in the years after insiders buy shares. 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 MedMen Enterprises Inc. (CSE:MMEN).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
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 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’.
View our latest analysis for MedMen Enterprises
MedMen Enterprises Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Co-Founder & Director Adam Bierman for CA$870k worth of shares, at about CA$0.56 per share. That means that an insider was happy to buy shares at above the current price of CA$0.25. It’s very possible they regret the purchase, but it’s more likely they are bullish about the company. To us, it’s very important to consider the price insiders pay for shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
While MedMen Enterprises insiders bought shares last year, they didn’t sell. Their average price was about CA$0.75. These transactions suggest that insiders have considered the current price attractive. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
MedMen Enterprises Insiders Bought Stock Recently
Over the last quarter, MedMen Enterprises insiders have spent a meaningful amount on shares. In total, insiders bought CA$2.6m worth of shares in that time, and we didn’t record any sales whatsoever. This is a positive in our book as it implies some confidence.
Does MedMen Enterprises Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. From looking at our data, insiders own CA$1.5m worth of MedMen Enterprises stock, about 1.1% of the company. We consider this fairly low insider ownership.
So What Do The MedMen Enterprises Insider Transactions Indicate?
The recent insider purchases are heartening. We also take confidence from the longer term picture of insider transactions. But we don’t feel the same about the fact the company is making losses. On this analysis the only slight negative we see is the fairly low (overall) insider ownership; their transactions suggest that they are quite positive on MedMen Enterprises stock. While we like knowing what’s going on with the insider’s ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Case in point: We’ve spotted 5 warning signs for MedMen Enterprises you should be aware of, and 2 of them are a bit unpleasant.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
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.
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.
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