We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Rainbow Rare Earths Limited (LON:RBW), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
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 Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
The Last 12 Months Of Insider Transactions At Rainbow Rare Earths
In the last twelve months, the biggest single purchase by an insider was when Non-Executive Chairman Adonis Pouroulis bought UK£300k worth of shares at a price of UK£0.12 per share. That means that an insider was happy to buy shares at above the current price. It’s very possible they regret the purchase, but it’s more likely they are bullish about the company. We generally consider it a positive if insiders have been buying on market, even above the current price. Adonis Pouroulis was the only individual insider to buy shares in the last twelve months.
You can see a visual depiction of insider transactions over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
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Does Rainbow Rare Earths Boast High Insider Ownership?
Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Rainbow Rare Earths insiders own about UK£2.1m worth of shares (which is 26% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Does This Data Suggest About Rainbow Rare Earths Insiders?
There haven’t been any insider transactions in the last three months — that doesn’t mean much. But insiders have shown more of an appetite for the stock, over the last year. Insiders own shares in Rainbow Rare Earths and we see no evidence to suggest they are worried about the future. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.