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

Even though Lotus Resources Limited (ASX:LOT) has fallen by 11% over the past week , insiders who sold AU$3.2m worth of stock over the past year have had less luck. The average selling price of AU$0.30 is still lower than the current share price, or in other words, insiders would have been better off holding on to their shares.

Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.

Check out our latest analysis for Lotus Resources

The Last 12 Months Of Insider Transactions At Lotus Resources

Over the last year, we can see that the biggest insider sale was by the Technical Director, Keith Bowes, for AU$1.8m worth of shares, at about AU$0.30 per share. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. The good news is that this large sale was at well above current price of AU$0.21. So it may not shed much light on insider confidence at current levels.

Insiders in Lotus Resources didn't buy any shares in the last year. 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!

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: Most of them are flying under the radar).

Insider Ownership Of Lotus Resources

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. Lotus Resources insiders own about AU$45m worth of shares. That equates to 9.0% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

What Might The Insider Transactions At Lotus Resources Tell Us?

The fact that there have been no Lotus Resources insider transactions recently certainly doesn't bother us. We don't take much encouragement from the transactions by Lotus Resources insiders. The modest level of insider ownership is, at least, some comfort. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. At Simply Wall St, we found 2 warning signs for Lotus Resources that deserve your attention before buying any shares.

Of course Lotus Resources 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 of direct interests only, but not derivative transactions or indirect interests.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.