More Money In The Bank For Bright Minds Biosciences Insiders Who Divested CA$16m

While it’s been a great week for Bright Minds Biosciences Inc. (CSE:DRUG) shareholders after stock gained 20%, they should consider it with a grain of salt. Even though stock prices were relatively low, insiders elected to sell CA$16m 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.

Check out our latest analysis for Bright Minds Biosciences

The Last 12 Months Of Insider Transactions At Bright Minds Biosciences

Over the last year, we can see that the biggest insider sale was by the Co-Founder, Ian McDonald, for CA$12m worth of shares, at about CA$40.29 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of CA$54.42. 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. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was only 31% of Ian McDonald's holding.

All up, insiders sold more shares in Bright Minds Biosciences than they bought, over the last year. 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!

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Bright Minds Biosciences Insiders Are Selling The Stock

Over the last three months, we've seen significant insider selling at Bright Minds Biosciences. In total, insiders dumped CA$3.8m worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.

Insider Ownership Of Bright Minds Biosciences

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. Insiders own 24% of Bright Minds Biosciences shares, worth about CA$81m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

So What Do The Bright Minds Biosciences Insider Transactions Indicate?

Insiders sold Bright Minds Biosciences shares recently, but they didn't buy any. Zooming out, the longer term picture doesn't give us much comfort. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. We'd practice some caution before buying! In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Bright Minds Biosciences. Case in point: We've spotted 5 warning signs for Bright Minds Biosciences you should be aware of, and 3 of these make us uncomfortable.

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 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.