Rainbow Rare Earths Slides As Insider Purchases Lose Another US$13k

The recent price decline of 17% in Rainbow Rare Earths Limited's (LON:RBW) stock may have disappointed insiders who bought US$112.2k worth of shares at an average price of US$0.098 in the past 12 months. Insiders buy with the expectation to see their investments rise in value over a period of time. However, recent losses have rendered their above investment worth US$99.6k which is not ideal.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

See our latest analysis for Rainbow Rare Earths

The Last 12 Months Of Insider Transactions At Rainbow Rare Earths

Over the last year, we can see that the biggest insider purchase was by Non-Executive Chairman Adonis Pouroulis for UK£112k worth of shares, at about UK£0.098 per share. That means that an insider was happy to buy shares at above the current price of UK£0.087. Their view may have changed since then, but at least it shows they felt optimistic at the time. To us, it's very important to consider the price insiders pay for shares. As a general rule, we feel more positive about a stock when an insider has bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. Adonis Pouroulis was the only individual insider to buy during the last year.

The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

There are always plenty of stocks that insiders are buying. If investing in lesser known companies is your style, you could take a look at this free list of companies. (Hint: insiders have been buying them).

Insider Ownership Of Rainbow Rare Earths

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£14m worth of shares. That equates to 25% 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 Does This Data Suggest About Rainbow Rare Earths Insiders?

The fact that there have been no Rainbow Rare Earths insider transactions recently certainly doesn't bother us. On a brighter note, the transactions over the last year are encouraging. Insiders do have a stake in Rainbow Rare Earths and their transactions don't cause us concern. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. For instance, we've identified 4 warning signs for Rainbow Rare Earths (2 are concerning) you should be aware of.

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.