We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Kazia Therapeutics Limited (ASX:KZA), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.
We don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
The Last 12 Months Of Insider Transactions At Kazia Therapeutics
In the last twelve months, the biggest single purchase by an insider was when insider Stephen Abolakian bought AU$2.5m worth of shares at a price of AU$0.81 per share. Even though the purchase was made at a significantly lower price than the recent price (AU$1.21), we still think insider buying is a positive. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
While Kazia Therapeutics insiders bought shares during the last year, they didn't sell. The average buy price was around AU$0.62. It is certainly positive to see that insiders have invested their own money in the company. However, we do note that they were buying at significantly lower prices than today's share price. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Kazia Therapeutics Insiders Bought Stock Recently
Over the last three months, we've seen significant insider buying at Kazia Therapeutics. Not only was there no selling that we can see, but they collectively bought AU$73k worth of shares. This is a positive in our book as it implies some confidence.
Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Kazia Therapeutics insiders own 18% of the company, worth about AU$28m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At Kazia Therapeutics Tell Us?
It's certainly positive to see the recent insider purchases. And the longer term insider transactions also give us confidence. But on the other hand, the company made a loss during the last year, which makes us a little cautious. Given that insiders also own a fair bit of Kazia Therapeutics we think they are probably pretty confident of a bright future. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. At Simply Wall St, we've found that Kazia Therapeutics has 3 warning signs (1 makes us a bit uncomfortable!) that deserve your attention before going any further with your analysis.
But note: Kazia Therapeutics 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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This article by Simply Wall St is general in nature. 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.
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