Have American Rare Earths Limited (ASX:ARR) Insiders Been Selling Their Stock?

Simply Wall St
December 27, 2021
Source: Shutterstock

Anyone interested in American Rare Earths Limited (ASX:ARR) should probably be aware that the Non Executive Director, Keith Middleton, recently divested AU$200k worth of shares in the company, at an average price of AU$0.16 each. The eyebrow raising move amounted to a reduction of 17% in their holding.

View our latest analysis for American Rare Earths

American Rare Earths Insider Transactions Over The Last Year

Notably, that recent sale by Keith Middleton is the biggest insider sale of American Rare Earths shares that we've seen in the last year. So it's clear an insider wanted to take some cash off the table, even below the current price of AU$0.17. 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 just 17% of Keith Middleton's stake.

Over the last year, we can see that insiders have bought 950.00k shares worth AU$122k. But insiders sold 1.25m shares worth AU$200k. 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!

ASX:ARR Insider Trading Volume December 27th 2021

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 18% of American Rare Earths shares, worth about AU$12m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

So What Do The American Rare Earths Insider Transactions Indicate?

The insider sales have outweighed the insider buying, at American Rare Earths, in the last three months. And our longer term analysis of insider transactions didn't bring confidence, either. While insiders do own shares, they don't own a heap, and they have been selling. We'd practice some caution before buying! While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. In terms of investment risks, we've identified 5 warning signs with American Rare Earths and understanding these should be part of your investment process.

But note: American Rare Earths 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, but not derivative transactions.

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