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 Groupon, Inc. (NASDAQ:GRPN).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year’.
The Last 12 Months Of Insider Transactions At Groupon
The Co-Founder & Independent Director Eric Lefkofsky made the biggest insider purchase in the last 12 months. That single transaction was for US$5.4m worth of shares at a price of US$432 each. So it’s clear an insider wanted to buy, even at a higher price than the current share price (being US$31.62). While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company’s future. To us, it’s very important to consider the price insiders pay for shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
In the last twelve months Groupon insiders were buying shares, but not selling. The average buy price was around US$92.63. This is nice to see since it implies that insiders might see value around current prices. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
Groupon is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Groupon Insiders Bought Stock Recently
It’s good to see that Groupon insiders have made notable investments in the company’s shares. Co-Founder & Independent Director Eric Lefkofsky spent US$5.4m on stock, and there wasn’t any selling. 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. A high insider ownership often makes company leadership more mindful of shareholder interests. Groupon insiders own 15% of the company, currently worth about US$137m 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 Does This Data Suggest About Groupon Insiders?
The recent insider purchase is heartening. And an analysis of the transactions over the last year also gives us confidence. But we don’t feel the same about the fact the company is making losses. Along with the high insider ownership, this analysis suggests that insiders are quite bullish about Groupon. Nice! In addition to knowing about insider transactions going on, it’s beneficial to identify the risks facing Groupon. In terms of investment risks, we’ve identified 1 warning sign with Groupon and understanding it should be part of your investment process.
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 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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