Insiders Who Sold CA$17m Of Bright Minds Biosciences Made The Right Call

While it’s been a great week for Bright Minds Biosciences Inc. (CSE:DRUG) shareholders after stock gained 14%, they should consider it with a grain of salt. Even though stock prices were relatively low, insiders elected to sell CA$17m worth of stock in the last year, which could indicate some expected downturn.

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.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

The Last 12 Months Of Insider Transactions At Bright Minds Biosciences

The Co-Founder, Ian McDonald, made the biggest insider sale in the last 12 months. That single transaction was for CA$12m worth of shares at a price of CA$40.29 each. That means that an insider was selling shares at slightly below the current price (CA$87.00). 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. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. This single sale was just 31% of Ian McDonald's stake.

Over the last year we saw more insider selling of Bright Minds Biosciences shares, than buying. 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!

See our latest analysis for Bright Minds Biosciences

For those who like to find hidden gems this free list of small cap companies with recent insider purchasing, could be just the ticket.

Insider Ownership

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. 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 22% of Bright Minds Biosciences shares, worth about CA$136m. 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 Bright Minds Biosciences Insider Transactions Indicate?

There haven't been any insider transactions in the last three months -- that doesn't mean much. It's great to see high levels of insider ownership, but looking back over the last year, we don't gain confidence from the Bright Minds Biosciences insiders selling. 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. When we did our research, we found 5 warning signs for Bright Minds Biosciences (3 don't sit too well with us!) that we believe deserve your full attention.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.