Selling Lotus Resources Shares at a Lower Price Than Current Market Value May Have Been a Costly Mistake for Insiders

Lotus Resources Limited's (ASX:LOT) stock price has dropped 11% in the previous week, but insiders who sold AU$21m in stock over the past year have had less luck. The average selling price of AU$0.18 is still lower than the current share price, or in other words, insiders would have been better off holding on to their shares.

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.

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Lotus Resources Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the insider, Grant Burnaford Davey, for AU$21m worth of shares, at about AU$0.18 per share. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. It's of some comfort that this sale was conducted at a price well above the current share price, which is AU$0.15. So it may not shed much light on insider confidence at current levels. The only individual insider seller over the last year was Grant Burnaford Davey.

Over the last year, we can see that insiders have bought 340.00k shares worth AU$56k. But they sold 118.22m shares for AU$21m. 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!

See our latest analysis for Lotus Resources

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Does Lotus Resources 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. Our data indicates that Lotus Resources insiders own about AU$15m worth of shares (which is 4.1% of the company). We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. We do generally prefer see higher levels of insider ownership.

So What Does This Data Suggest About Lotus Resources Insiders?

The fact that there have been no Lotus Resources insider transactions recently certainly doesn't bother us. Our analysis of Lotus Resources insider transactions leaves us cautious. The modest level of insider ownership is, at least, some comfort. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Every company has risks, and we've spotted 2 warning signs for Lotus Resources (of which 1 is significant!) you should know about.

But note: Lotus Resources 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.