Lithium Universe Insider Stock Sales Prove Timely As Market Valuation Descends To AU$11m

Insiders at Lithium Universe Limited (ASX:LU7) sold AU$627k worth of stock at an average price of AU$0.012 a share over the past year, making the most of their investment. After the stock price dropped 13% last week, the company's market value declined by AU$1.6m, but insiders were able to mitigate their losses.

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 Lithium Universe

The Last 12 Months Of Insider Transactions At Lithium Universe

Over the last year, we can see that the biggest insider sale was by the insider, Bilal Ahmad, for AU$627k worth of shares, at about AU$0.012 per share. That means that an insider was selling shares at slightly below the current price (AU$0.014). As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was 100% of Bilal Ahmad's holding. Bilal Ahmad was the only individual insider to sell shares in the last twelve months.

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!

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Insiders At Lithium Universe Have Sold Stock Recently

Over the last three months, we've seen significant insider selling at Lithium Universe. In total, insider Bilal Ahmad sold AU$627k worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.

Insider Ownership

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. It's great to see that Lithium Universe insiders own 42% of the company, worth about AU$4.9m. 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 Lithium Universe Insiders?

An insider sold Lithium Universe shares recently, but they didn't buy any. And there weren't any purchases to give us comfort, over the last year. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Lithium Universe. For instance, we've identified 5 warning signs for Lithium Universe (3 are a bit unpleasant) you should be aware of.

Of course Lithium Universe 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.

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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.

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