Insiders sold AU$854k worth of Grand Gulf Energy Limited (ASX:GGE) stock last year, could be a warning sign to watch out for

By
Simply Wall St
Published
January 18, 2022
ASX:GGE
Source: Shutterstock

While Grand Gulf Energy Limited (ASX:GGE) shareholders have enjoyed a good week with stock up 33%, they need remain vigilant. Although prices were relatively low, insiders chose to sell AU$854k 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, we would consider it foolish to ignore insider transactions altogether.

See our latest analysis for Grand Gulf Energy

The Last 12 Months Of Insider Transactions At Grand Gulf Energy

Over the last year, we can see that the biggest insider sale was by the insider, Charles Morgan, for AU$854k worth of shares, at about AU$0.029 per share. That means that an insider was selling shares at slightly below the current price (AU$0.032). 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. It is worth noting that this sale was only 39% of Charles Morgan's holding. Charles Morgan was the only individual insider to sell over the last year.

In the last twelve months insiders purchased 21.28m shares for AU$530k. But insiders sold 30.00m shares worth AU$854k. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

insider-trading-volume
ASX:GGE Insider Trading Volume January 18th 2022

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Does Grand Gulf Energy Boast High Insider Ownership?

Many investors like to check how much of a company is owned by 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. Grand Gulf Energy insiders own 41% of the company, currently worth about AU$17m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Does This Data Suggest About Grand Gulf Energy Insiders?

The fact that there have been no Grand Gulf Energy insider transactions recently certainly doesn't bother us. It's heartening that insiders own plenty of stock, but we'd like to see more insider buying, since the last year of Grand Gulf Energy insider transactions don't fill us with confidence. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Grand Gulf Energy. Be aware that Grand Gulf Energy is showing 6 warning signs in our investment analysis, and 2 of those are potentially serious...

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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