This Insider Has Just Sold Shares In CSPC Pharmaceutical Group

We wouldn't blame CSPC Pharmaceutical Group Limited (HKG:1093) shareholders if they were a little worried about the fact that Dongchen Cai, the Executive Chairman recently netted about HK$116m selling shares at an average price of HK$2.95. However, that sale only accounted for 1.4% of their holding, so arguably it doesn't say much about their conviction.

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The Last 12 Months Of Insider Transactions At CSPC Pharmaceutical Group

Notably, that recent sale by Dongchen Cai is the biggest insider sale of CSPC Pharmaceutical Group shares that we've seen in the last year. So it's clear an insider wanted to take some cash off the table, even below the current price of HK$9.19. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower 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 1.4% of Dongchen Cai's holding.

Happily, we note that in the last year insiders paid HK$173m for 33.09m shares. On the other hand they divested 39.28m shares, for HK$116m. Overall, CSPC Pharmaceutical Group insiders were net buyers during the last year. The average buy price was around HK$5.22. It is certainly positive to see that insiders have invested their own money in the company. But we must note that the investments were made at well below today's share price. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

View our latest analysis for CSPC Pharmaceutical Group

CSPC Pharmaceutical Group is not the only stock insiders are buying. So take a peek at this free list of under-the-radar companies with insider buying.

Does CSPC Pharmaceutical Group Boast High Insider Ownership?

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. CSPC Pharmaceutical Group insiders own about HK$26b worth of shares (which is 25% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

What Might The Insider Transactions At CSPC Pharmaceutical Group Tell Us?

The stark truth for CSPC Pharmaceutical Group is that there has been more insider selling than insider buying in the last three months. On the other hand, the insider transactions over the last year are encouraging. On top of that, insiders own a significant portion of the company. So we're happy to look past recent trading. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing CSPC Pharmaceutical Group. Every company has risks, and we've spotted 2 warning signs for CSPC Pharmaceutical Group you should know about.

But note: CSPC Pharmaceutical Group 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 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.