Lynas Rare Earths Limited (ASX:LYC) insiders may have foreseen weakness, sold AU$6.2m worth of stock despite low prices

By
Simply Wall St
Published
August 24, 2021
ASX:LYC
Source: Shutterstock

Lynas Rare Earths Limited's (ASX:LYC) stock price has dropped 4.6% in the previous week, but insiders who sold AU$6.2m in stock over the past year have had less luck. Insiders might have been better off holding onto their shares, given that the average selling price of AU$3.42 is still below the current share price.

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.

View our latest analysis for Lynas Rare Earths

The Last 12 Months Of Insider Transactions At Lynas Rare Earths

In the last twelve months, the biggest single sale by an insider was when the MD, CEO & Director, Amanda Lacaze, sold AU$3.5m worth of shares at a price of AU$5.05 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of AU$6.47. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. We note that the biggest single sale was only 20% of Amanda Lacaze's holding. Amanda Lacaze was the only individual insider to sell over the last year.

Amanda Lacaze divested 1.80m shares over the last 12 months at an average price of AU$3.42. 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!

insider-trading-volume
ASX:LYC Insider Trading Volume August 25th 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

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Lynas Rare Earths insiders own about AU$61m worth of shares. That equates to 1.1% 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 Lynas Rare Earths Tell Us?

The fact that there have been no Lynas Rare Earths insider transactions recently certainly doesn't bother us. Still, the insider transactions at Lynas Rare Earths in the last 12 months are not very heartening. But we do like the fact that insiders own a fair chunk of the company. 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. For example - Lynas Rare Earths has 2 warning signs we think you should be aware of.

Of course Lynas Rare Earths 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, but not derivative transactions.

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