We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Indigo Books & Music Inc. (TSE:IDG), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. 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'.
Indigo Books & Music Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Founder Heather Reisman bought CA$988k worth of shares at a price of CA$2.50 per share. Even though the purchase was made at a significantly lower price than the recent price (CA$4.00), we still think insider buying is a positive. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.
Indigo Books & Music insiders may have bought shares in the last year, but they didn't sell any. They paid about CA$1.87 on average. We don't deny that it is nice to see insiders buying stock in the company. But we must note that the investments were made at well below today's share price. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Indigo Books & Music Insiders Bought Stock Recently
We saw some Indigo Books & Music insider buying shares in the last three months. Chief Technology Officer Bahman Parizadeh shelled out CA$20k for shares in that time. It's good to see the insider buying, as well as the lack of recent sellers. But the amount invested in the last three months isn't enough for us too put much weight on it, as a single factor.
Insider Ownership of Indigo Books & Music
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. Indigo Books & Music insiders own about CA$34m worth of shares. That equates to 31% of the company. 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 Indigo Books & Music Insider Transactions Indicate?
Insider purchases may have been minimal, in the last three months, but there was no selling at all. Overall the buying isn't worth writing home about. However, our analysis of transactions over the last year is heartening. Insiders own shares in Indigo Books & Music and we see no evidence to suggest they are worried about the future. 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. Case in point: We've spotted 2 warning signs for Indigo Books & Music you should be aware of, and 1 of them is significant.
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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