Insiders' AU$8.89m Investments In Red Following Rubicon Water's AU$7.2m Dip In Market Value

The recent 13% drop in Rubicon Water Limited's (ASX:RWL) stock could come as a blow to insiders who purchased AU$8.89m worth of stock at an average buy price of AU$0.25 over the past 12 months. This is not good as insiders invest based on expectations that their money will appreciate over time. However, as a result of recent losses, their original investment is now worth only AU$7.47m.

Although we don't think shareholders should simply follow insider transactions, we do think it is perfectly logical to keep tabs on what insiders are doing.

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The Last 12 Months Of Insider Transactions At Rubicon Water

The Deputy Chair Gordon Dickinson made the biggest insider purchase in the last 12 months. That single transaction was for AU$5.7m worth of shares at a price of AU$0.25 each. That means that an insider was happy to buy shares at above the current price of AU$0.21. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. To us, it's very important to consider the price insiders pay for shares. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.

While Rubicon Water insiders bought shares during the last year, they didn't sell. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

See our latest analysis for Rubicon Water

Rubicon Water is not the only stock that insiders are buying. For those who like to find small cap companies at attractive valuations, this free list of growing companies with recent insider purchasing, could be just the ticket.

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Rubicon Water insiders own about AU$20m worth of shares. That equates to 39% 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.

So What Do The Rubicon Water Insider Transactions Indicate?

It doesn't really mean much that no insider has traded Rubicon Water shares in the last quarter. However, our analysis of transactions over the last year is heartening. Overall we don't see anything to make us think Rubicon Water insiders are doubting the company, and they do own shares. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Case in point: We've spotted 3 warning signs for Rubicon Water you should be aware of, and 1 of these is significant.

But note: Rubicon Water 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 of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.