Insiders at Pilbara Minerals Limited (ASX:PLS) sold AU$6.6m worth of stock, a potential red flag that needs to be monitored

By
Simply Wall St
Published
January 15, 2022
ASX:PLS
Source: Shutterstock

While it’s been a great week for Pilbara Minerals Limited (ASX:PLS) shareholders after stock gained 6.3%, they should consider it with a grain of salt. Although prices were relatively low, insiders chose to sell AU$6.6m worth of stock in the past 12 months. This could be a sign of impending weakness.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.

See our latest analysis for Pilbara Minerals

Pilbara Minerals Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the MD, CEO & Director, Kenneth Brinsden, sold AU$5.7m worth of shares at a price of AU$1.51 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of AU$3.72. 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 43% of Kenneth Brinsden's stake.

Pilbara Minerals insiders didn't buy any shares over the last year. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

insider-trading-volume
ASX:PLS Insider Trading Volume January 15th 2022

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

Pilbara Minerals Insiders Are Selling The Stock

The last three months saw significant insider selling at Pilbara Minerals. In total, insiders sold AU$792k worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.

Insider Ownership of Pilbara Minerals

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 0.3% of Pilbara Minerals shares, worth about AU$31m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.

What Might The Insider Transactions At Pilbara Minerals Tell Us?

Insiders sold stock recently, but they haven't been buying. And even if we look at the last year, we didn't see any purchases. Insiders own shares, but we're still pretty cautious, given the history of sales. We're in no rush to buy! 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. Every company has risks, and we've spotted 3 warning signs for Pilbara Minerals you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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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