Atlas Pearls Insiders Made A Wise Decision By Selling AU$2.3m Worth Of Stock

While Atlas Pearls Limited (ASX:ATP) shareholders have had a good week with the stock up 11%, they shouldn't let their guards down. Although prices were relatively low, insiders chose to sell AU$2.3m worth of stock in the past 12 months. This could be a sign of impending weakness.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

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The Last 12 Months Of Insider Transactions At Atlas Pearls

In the last twelve months, the biggest single sale by an insider was when the Non-Executive Director, Timothy Martin, sold AU$2.2m worth of shares at a price of AU$0.12 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of AU$0.21. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was 76% of Timothy Martin's stake. Timothy Martin was the only individual insider to sell over the last year.

Timothy Martin ditched 18.20m shares over the year. The average price per share was AU$0.13. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

See our latest analysis for Atlas Pearls

If you are like me, then you will not want to miss this free list of small cap stocks that are not only being bought by insiders but also have attractive valuations.

Does Atlas Pearls Boast High Insider Ownership?

For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 20% of Atlas Pearls shares, worth about AU$16m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

What Might The Insider Transactions At Atlas Pearls Tell Us?

There haven't been any insider transactions in the last three months -- that doesn't mean much. Our analysis of Atlas Pearls insider transactions leaves us cautious. But we do like the fact that insiders own a fair chunk of the company. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. For example, Atlas Pearls has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

But note: Atlas Pearls may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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 of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.