Insiders Give Up AU$43k As Legend Mining Stock Drops To AU$0.014

The recent 13% drop in Legend Mining Limited's (ASX:LEG) stock could come as a blow to insiders who purchased AU$175.7k worth of stock at an average buy price of AU$0.018 over the past 12 months. Insiders buy with the expectation to see their investments rise in value over a period of time. However, recent losses have rendered their above investment worth AU$133.0k which is not ideal.

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.

See our latest analysis for Legend Mining

The Last 12 Months Of Insider Transactions At Legend Mining

The Executive Chairman Mark Wilson made the biggest insider purchase in the last 12 months. That single transaction was for AU$126k worth of shares at a price of AU$0.017 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$0.014). Their view may have changed since then, but at least it shows they felt optimistic at the time. In our view, the price an insider pays for shares is very important. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.

While Legend Mining insiders bought shares during the last year, they didn't sell. They paid about AU$0.018 on average. 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. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

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

Insider Ownership Of Legend Mining

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Our data indicates that Legend Mining insiders own about AU$3.4m worth of shares (which is 8.2% of the company). We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. Overall, this level of ownership isn't that impressive, but it's certainly better than nothing!

So What Do The Legend Mining Insider Transactions Indicate?

There haven't been any insider transactions in the last three months -- that doesn't mean much. On a brighter note, the transactions over the last year are encouraging. The transactions are fine but it'd be more encouraging if Legend Mining insiders bought more shares in the company. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Legend Mining. Our analysis shows 4 warning signs for Legend Mining (2 are significant!) and we strongly recommend you look at them before investing.

But note: Legend Mining 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.