We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So we'll take a look at whether insiders have been buying or selling shares in Identitii Limited (ASX:ID8).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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 equally, we would consider it foolish to ignore insider transactions altogether. 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 Identitii
In the last twelve months, the biggest single sale by an insider was when the insider, Kenneth Baker, sold AU$465k worth of shares at a price of AU$0.22 per share. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. The silver lining is that this sell-down took place above the latest price (AU$0.14). So it may not tell us anything about how insiders feel about the current share price. Notably Kenneth Baker was also the biggest buyer, having purchased AU$467k worth of shares.
Over the last year, we can see that insiders have bought 3.86m shares worth AU$467k. But they sold 4.45m shares for AU$679k. Over the last year we saw more insider selling of Identitii shares, than buying. The sellers received a price of around AU$0.15, on average. It's not too encouraging to see that insiders have sold at below the current price. Since insiders sell for many reasons, we wouldn't put too much weight on it. 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!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Does Identitii Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Identitii insiders own about AU$4.7m worth of shares. That equates to 22% of the company. 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 Identitii Tell Us?
There haven't been any insider transactions in the last three months -- that doesn't mean much. Our analysis of Identitii insider transactions leaves us cautious. But it's good to see that insiders own shares in the company. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Every company has risks, and we've spotted 5 warning signs for Identitii (of which 2 are potentially serious!) you should know about.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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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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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