Insider Sellers Might Regret Selling Silkwave Shares at a Lower Price Than Current Market Value

Silkwave Inc's (HKG:471) stock price has dropped 21% in the previous week, but insiders who sold US$29m in stock over the past year have had less luck. Given that the average selling price of US$0.32 is still lower than the current share price, insiders would probably have been better off keeping their shares.

While insider transactions are not the most important thing when it comes to long-term investing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

See our latest analysis for Silkwave

Silkwave Insider Transactions Over The Last Year

The Chairman & CEO, Chau Chi Wong, made the biggest insider sale in the last 12 months. That single transaction was for HK$14m worth of shares at a price of HK$0.50 each. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. The silver lining is that this sell-down took place above the latest price (HK$0.15). So it may not tell us anything about how insiders feel about the current share price. Notably Chau Chi Wong was also the biggest buyer, having purchased HK$2.7m worth of shares.

All up, insiders sold more shares in Silkwave than they bought, over the last year. They sold for an average price of about US$0.32. It is certainly not great to see that insiders have sold shares in the company. But the selling was at much higher prices than the current share price (HK$0.15), so it probably doesn't tell us a lot about the value on offer today. 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!

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Silkwave Insiders Are Selling The Stock

The last quarter saw substantial insider selling of Silkwave shares. Specifically, Chairman & CEO Chau Chi Wong ditched HK$3.9m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.

Does Silkwave 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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Silkwave insiders own about HK$149m worth of shares (which is 54% 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 Does This Data Suggest About Silkwave Insiders?

An insider hasn't bought Silkwave stock in the last three months, but there was some selling. Despite some insider buying, the longer term picture doesn't make us feel much more positive. 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. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Silkwave. For example, Silkwave has 6 warning signs (and 3 which can't be ignored) we think you should know about.

Of course Silkwave 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.