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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 8common Limited (ASX:8CO).
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 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 8common
In the last twelve months, the biggest single sale by an insider was when the Founder, Kah Lim, sold AU$333k worth of shares at a price of AU$0.04 per share. That means that even when the share price was below the current price of AU$0.15, 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. 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. We note that the biggest single sale was only 25.4% of Kah Lim’s holding. Kah Lim was the only individual insider to sell over the last year.
You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
I will like 8common better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
8common Insiders Bought Stock Recently
Over the last three months, we’ve seen significant insider buying at 8common. Specifically, Kok Fui Lau bought AU$84k worth of shares in that time, and we didn’t record any sales whatsoever. This could be interpreted as suggesting a positive outlook.
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. Insiders own 40% of 8common shares, worth about AU$8.9m. 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 Does This Data Suggest About 8common Insiders?
The recent insider purchase is heartening. However, the longer term transactions are not so encouraging. The more recent transactions are a positive, but 8common insiders haven’t shown the sustained enthusiasm that we look for, although they do own a decent number of shares, overall. In short they are likely aligned with shareholders. I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free .
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body.
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 firstname.lastname@example.org. 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.