Have Insiders Been Buying LawFinance Limited (ASX:LAW) Shares?

It is not uncommon to see companies perform well in the years after insiders buy shares. 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 LawFinance Limited (ASX:LAW).

What Is Insider Selling?

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.

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. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.

View our latest analysis for LawFinance

The Last 12 Months Of Insider Transactions At LawFinance

In the last twelve months, the biggest single purchase by an insider was when CEO, MD & Director Daniel Kleijn bought AU$68k worth of shares at a price of AU$0.025 per share. That implies that an insider found the current price of AU$0.031 per share to be enticing. Of course they may have changed their mind. But this suggests they are optimistic. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. In this case we're pleased to report that the insider purchases were made at close to current prices.

In the last twelve months LawFinance insiders were buying shares, but not selling. The average buy price was around AU$0.032. This is nice to see since it implies that insiders might see value around current prices. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

LawFinance Insiders Bought Stock Recently

Over the last quarter, LawFinance insiders have spent a meaningful amount on shares. Overall, two insiders shelled out AU$88k for shares in the company -- and none sold. This could be interpreted as suggesting a positive outlook.

Insider Ownership of LawFinance

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. Insiders own 23% of LawFinance shares, worth about AU$8.3m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

So What Does This Data Suggest About LawFinance Insiders?

The recent insider purchases are heartening. And the longer term insider transactions also give us confidence. But we don't feel the same about the fact the company is making losses. When combined with notable insider ownership, these factors suggest LawFinance insiders are well aligned, and that they may think the share price is too low. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. To help with this, we've discovered 6 warning signs (4 are a bit concerning!) that you ought to be aware of before buying any shares in LawFinance.

Of course LawFinance may not be the best stock to buy. So you may wish to see this free collection of high quality 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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