Insiders At Tencent Holdings Sold CN¥48m In Stock, Alluding To Potential Weakness

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Over the past year, many Tencent Holdings Limited (HKG:700) insiders sold a significant stake in the company which may have piqued investors' interest. When evaluating insider transactions, knowing whether insiders are buying is usually more beneficial than knowing whether they are selling, as the latter can be open to many interpretations. However, if numerous insiders are selling, shareholders should investigate more.

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.

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The Last 12 Months Of Insider Transactions At Tencent Holdings

In the last twelve months, the biggest single sale by an insider was when the Independent Non-Executive Director, Ian Charles Stone, sold HK$13m worth of shares at a price of HK$445 per share. That means that even when the share price was below the current price of HK$590, an insider wanted to cash in some shares. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. 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. This single sale was just 10% of Ian Charles Stone's stake.

In the last year Tencent Holdings insiders didn't buy any company stock. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

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Insiders At Tencent Holdings Have Sold Stock Recently

The last three months saw significant insider selling at Tencent Holdings. In total, insiders sold HK$19m worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.

Does Tencent Holdings 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. Tencent Holdings insiders own about HK$419b worth of shares (which is 7.8% 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 Tencent Holdings Insider Transactions Indicate?

Insiders haven't bought Tencent Holdings stock in the last three months, but there was some selling. And there weren't any purchases to give us comfort, over the last year. But it is good to see that Tencent Holdings is growing earnings. It is good to see high insider ownership, but the insider selling leaves us cautious. 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. In terms of investment risks, we've identified 1 warning sign with Tencent Holdings and understanding it should be part of your investment process.

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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.