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 shareholders might well want to know whether insiders have been buying or selling shares in e-therapeutics plc (LON:ETX).
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 logic dictates you should pay some attention to whether insiders are buying or selling shares. 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 e-therapeutics
In the last twelve months, the biggest single purchase by an insider was when CEO & Director Ahmad Mortazavi bought UK£200k worth of shares at a price of UK£0.12 per share. We do like to see buying, but this purchase was made at well below the current price of UK£0.24. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
e-therapeutics insiders may have bought shares in the last year, but they didn't sell any. 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!
e-therapeutics is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Have e-therapeutics Insiders Traded Recently?
Over the last three months, we've seen a bit of insider buying at e-therapeutics. Independent Non-Executive Chairman Trevor Jones shelled out UK£5.5k 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 e-therapeutics
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. e-therapeutics insiders own about UK£57m worth of shares (which is 56% 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 e-therapeutics Insider Transactions Indicate?
We note a that there has been a bit of insider buying recently (but no selling). Overall the buying isn't worth writing home about. On a brighter note, the transactions over the last year are encouraging. Judging from their transactions, and high insider ownership, e-therapeutics insiders feel good about the company's 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. Our analysis shows 3 warning signs for e-therapeutics (1 is a bit unpleasant!) and we strongly recommend you look at them before investing.
But note: e-therapeutics 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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