It is not uncommon to see companies perform well in the years after insiders buy shares. 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 shareholders might well want to know whether insiders have been buying or selling shares in Cresco Labs Inc. (CSE:CL).
Do Insider Transactions Matter?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
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'.
Cresco Labs Insider Transactions Over The Last Year
In fact, the recent sale by insider Joseph Caltabiano was not their only sale of Cresco Labs shares this year. They previously made an even bigger sale of -CA$5.8m worth of shares at a price of CA$7.99 per share. That means that even when the share price was below the current price of CA$14.26, an insider wanted to cash in some shares. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. 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 73% of Joseph Caltabiano's stake.
Over the last year, we can see that insiders have bought 312.50k shares worth CA$551k. But they sold 1.98m shares for CA$17m. Over the last year we saw more insider selling of Cresco Labs shares, than buying. The average sell price was around US$8.45. 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!
I will like Cresco Labs better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insiders at Cresco Labs Have Sold Stock Recently
There was substantially more insider selling, than buying, of Cresco Labs shares over the last three months. In total, insiders sold CA$5.2m worth of shares in that time. Meanwhile Independent Director Gerald Corcoran bought CA$129k worth. We don't view these transactions as a positive sign.
Does Cresco Labs 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. Cresco Labs insiders own 18% of the company, currently worth about CA$825m based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Do The Cresco Labs Insider Transactions Indicate?
Unfortunately, there has been more insider selling of Cresco Labs stock, than buying, in the last three months. Despite some insider buying, the longer term picture doesn't make us feel much more positive. 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. You'd be interested to know, that we found 4 warning signs for Cresco Labs and we suggest you have a look.
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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