We often see insiders buying up shares in companies that perform well over the long term. 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 K2fly Limited (ASX:K2F).
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 would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise'.
The Last 12 Months Of Insider Transactions At K2fly
In the last twelve months, the biggest single sale by an insider was when the insider, Paul Cozzi, sold AU$1.3m worth of shares at a price of AU$0.28 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of AU$0.41. 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. This single sale was just 46% of Paul Cozzi's stake. Paul Cozzi was the only individual insider to sell shares in the last twelve months. Notably Paul Cozzi was also the biggest buyer, having purchased AU$585k worth of shares.
Over the last year, we can see that insiders have bought 4.15m shares worth AU$585k. But insiders sold 5.22m shares worth AU$1.5m. Paul Cozzi divested 5.22m shares over the last 12 months at an average price of AU$0.28. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. 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.
Insiders at K2fly Have Sold Stock Recently
The last quarter saw substantial insider selling of K2fly shares. In total, insider Paul Cozzi sold AU$1.5m 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 of K2fly
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. We usually like to see fairly high levels of insider ownership. It's great to see that K2fly insiders own 43% of the company, worth about AU$18m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Does This Data Suggest About K2fly Insiders?
An insider sold K2fly shares recently, but they didn't buy any. And our longer term analysis of insider transactions didn't bring confidence, either. 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. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. For instance, we've identified 6 warning signs for K2fly (1 is a bit concerning) you should be aware of.
Of course K2fly 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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