Meitu Insiders Who Sold Avert HK$9.4b Market Cap Dip

Insiders seem to have made the most of their holdings by selling CN¥1.2b worth of Meitu, Inc. (HKG:1357) stock at an average sell price of CN¥6.68 during the past year. The company's market worth decreased by HK$9.4b over the past week after the stock price dropped 17%, although insiders were able to minimize their losses

Although we don't think shareholders should simply follow insider transactions, we do think it is perfectly logical to keep tabs on what insiders are doing.

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Meitu Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the insider, Wen Sheng Cai, for HK$341m worth of shares, at about HK$6.43 per share. That means that an insider was selling shares at slightly below the current price (HK$9.77). 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 only 5.1% of Wen Sheng Cai's holding.

All up, insiders sold more shares in Meitu than they bought, over the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

Check out our latest analysis for Meitu

I will like Meitu better if I see some big insider buys. While we wait, check out this free list of undervalued and small cap stocks with considerable, recent, insider buying.

Meitu Insiders Are Selling The Stock

Over the last three months, we've seen notably more insider selling, than insider buying, at Meitu. In total, insider Wen Sheng Cai sold HK$425m worth of shares in that time. On the flip side, Founder Zeyuan Wu spent HK$7.0m on purchasing shares (as mentioned above) . Since the selling really does outweigh the buying, we'd say that these transactions may suggest that some insiders feel the shares are not cheap.

Insider Ownership

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. It's great to see that Meitu insiders own 24% of the company, worth about HK$11b. 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 Does This Data Suggest About Meitu Insiders?

Unfortunately, there has been more insider selling of Meitu stock, than buying, in the last three months. Zooming out, the longer term picture doesn't give us much comfort. But it is good to see that Meitu is growing earnings. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. 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 found 2 warning signs for Meitu that deserve your attention before buying any shares.

Of course Meitu may not be the best stock to buy. So you may wish to see this free collection of high quality 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.