As SQI Diagnostics Inc. (CVE:SQD) drops to CA$70m market cap, insiders might rethink their CA$2.7m stock purchase earlier this year

By
Simply Wall St
Published
February 25, 2022
TSXV:SQD
Source: Shutterstock

The recent 10.0% drop in SQI Diagnostics Inc.'s (CVE:SQD) stock could come as a blow to insiders who purchased CA$2.7m worth of stock at an average buy price of CA$0.19 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 CA$2.5m.

Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.

View our latest analysis for SQI Diagnostics

SQI Diagnostics Insider Transactions Over The Last Year

The Independent Director Wilmot Matthews made the biggest insider purchase in the last 12 months. That single transaction was for CA$1.3m worth of shares at a price of CA$0.19 each. That means that an insider was happy to buy shares at above the current price of CA$0.18. 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. In our view, the price an insider pays for shares is very important. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.

Happily, we note that in the last year insiders paid CA$2.7m for 14.04m shares. But insiders sold 382.50k shares worth CA$162k. Overall, SQI Diagnostics insiders were net buyers during the last year. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

insider-trading-volume
TSXV:SQD Insider Trading Volume February 25th 2022

SQI Diagnostics is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Does SQI Diagnostics Boast High Insider Ownership?

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. SQI Diagnostics insiders own 49% of the company, currently worth about CA$34m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Do The SQI Diagnostics Insider Transactions Indicate?

It doesn't really mean much that no insider has traded SQI Diagnostics shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. With high insider ownership and encouraging transactions, it seems like SQI Diagnostics insiders think the business has merit. 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. To that end, you should learn about the 5 warning signs we've spotted with SQI Diagnostics (including 3 which are potentially serious).

Of course SQI Diagnostics 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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