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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 Merlin Entertainments plc (LON:MERL).
Do Insider Transactions Matter?
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.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. 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’.
Merlin Entertainments Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Chief New Openings Officer and Member of Executive Board, John Jakobsen, for UK£619k worth of shares, at about UK£3.87 per share. So it’s clear an insider wanted to take some cash off the table, even below the current price of UK£3.95. 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. 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. This single sale was just 20.5% of John Jakobsen’s stake.
In the last twelve months insiders netted UK£695k for 180k shares sold. Insiders in Merlin Entertainments didn’t buy any shares in the last year. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Insider Ownership of Merlin Entertainments
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It appears that Merlin Entertainments insiders own 1.2% of the company, worth about UK£49m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Does This Data Suggest About Merlin Entertainments Insiders?
It doesn’t really mean much that no insider has traded Merlin Entertainments shares in the last quarter. We don’t take much encouragement from the transactions by Merlin Entertainments insiders. The modest level of insider ownership is, at least, some comfort. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Merlin Entertainments.
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.