How Much Are Focusrite plc (LON:TUNE) Insiders Taking Off The Table?

By
Simply Wall St
Published
July 02, 2021
AIM:TUNE
Source: Shutterstock

We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So before you buy or sell Focusrite plc (LON:TUNE), you may well want to know whether insiders have been buying or selling.

Do Insider Transactions Matter?

Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, most countries require that the company discloses such transactions to the market.

We don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.

Check out our latest analysis for Focusrite

The Last 12 Months Of Insider Transactions At Focusrite

In the last twelve months, the biggest single sale by an insider was when the insider, Jeremy Michael Wilson, sold UK£1.0m worth of shares at a price of UK£9.56 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of UK£13.20. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent 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. We note that the biggest single sale was 53% of Jeremy Michael Wilson's holding.

All up, insiders sold more shares in Focusrite than they bought, over the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

insider-trading-volume
AIM:TUNE Insider Trading Volume July 2nd 2021

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Focusrite Insiders Bought Stock Recently

There was some insider buying at Focusrite over the last quarter. Independent Non-Executive Director Paul Dean purchased UK£18k worth of shares in that period. We like it when there are only buyers, and no sellers. However, in this case the amount invested recently is quite small.

Does Focusrite Boast High Insider Ownership?

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it's a good sign if insiders own a significant number of shares in the company. Focusrite insiders own about UK£258m worth of shares (which is 34% of the company). 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 Focusrite Insider Transactions Indicate?

Our data shows a little insider buying, but no selling, in the last three months. That said, the purchases were not large. It's heartening that insiders own plenty of stock, but we'd like to see more insider buying, since the last year of Focusrite insider transactions don't fill us with confidence. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. At Simply Wall St, we've found that Focusrite has 2 warning signs (1 can't be ignored!) that deserve your attention before going any further with your analysis.

But note: Focusrite may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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, but not derivative transactions.

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This article by Simply Wall St is general in nature. 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.
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