For Founders Metals Insiders, Selling CA$4.1m Of Shares Was A Smart Move

Despite a 20% gain in Founders Metals Inc.'s (CVE:FDR) stock price this week, shareholders shouldn't let up. In spite of the relatively cheap prices, insiders made the decision to sell CA$4.1m worth of stock in the last 12 months. This could be a warning indicator of vulnerabilities in the future.

While insider transactions are not the most important thing when it comes to long-term investing, we would consider it foolish to ignore insider transactions altogether.

Check out our latest analysis for Founders Metals

The Last 12 Months Of Insider Transactions At Founders Metals

Over the last year, we can see that the biggest insider sale was by the CEO, President, Colin Padget, for CA$1.1m worth of shares, at about CA$2.90 per share. That means that even when the share price was below the current price of CA$4.45, an insider wanted to cash in some shares. 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. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. This single sale was just 50% of Colin Padget's stake.

Over the last year, we can see that insiders have bought 8.00k shares worth CA$13k. But insiders sold 1.55m shares worth CA$4.1m. All up, insiders sold more shares in Founders Metals than they bought, over 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!

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: Most of them are flying under the radar).

Founders Metals Insiders Are Selling The Stock

The last three months saw significant insider selling at Founders Metals. Specifically, insiders ditched CA$3.6m 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.

Does Founders Metals Boast High 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. Insiders own 14% of Founders Metals shares, worth about CA$46m. 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 Does This Data Suggest About Founders Metals Insiders?

Insiders sold Founders Metals shares recently, but they didn't buy any. Despite some insider buying, the longer term picture doesn't make us feel much more positive. While insiders do own shares, they don't own a heap, and they have been selling. We're in no rush to buy! While it's good to be aware of what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Every company has risks, and we've spotted 4 warning signs for Founders Metals (of which 3 make us uncomfortable!) you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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.