We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. On the other hand, we’d be remiss not to mention that insider sales have been known to precede tough periods for a business. So shareholders might well want to know whether insiders have been buying or selling shares in Mesoblast Limited (ASX:MSB).
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. 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. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise’.
Mesoblast Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Independent Non-Executive Director Donal O’Dwyer bought AU$100k worth of shares at a price of AU$1.18 per share. We do like to see buying, but this purchase was made at well below the current price of AU$3.27. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn’t tell us much about what they think of current prices.
Mesoblast insiders may have bought shares in the last year, but they didn’t sell any. The average buy price was around AU$1.36. It is certainly positive to see that insiders have invested their own money in the company. However, you should keep in mind that they bought when the share price was meaningfully below today’s levels. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Mesoblast is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insider Ownership of Mesoblast
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it’s a good sign if insiders own a significant number of shares in the company. Mesoblast insiders own about AU$253m worth of shares (which is 13% 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 Does This Data Suggest About Mesoblast Insiders?
The fact that there have been no Mesoblast insider transactions recently certainly doesn’t bother us. However, our analysis of transactions over the last year is heartening. It would be great to see more insider buying, but overall it seems like Mesoblast insiders are reasonably well aligned (owning significant chunk of the company’s shares) and optimistic for the future. 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. At Simply Wall St, we found 2 warning signs for Mesoblast that deserve your attention before buying any shares.
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.
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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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