Need To Know: Viva Biotech Holdings (HKG:1873) Insiders Have Been Selling Shares

It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So shareholders might well want to know whether insiders have been buying or selling shares in Viva Biotech Holdings (HKG:1873).

Do Insider Transactions Matter?

Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, rules govern insider transactions, and certain disclosures are required.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.

Check out our latest analysis for Viva Biotech Holdings

The Last 12 Months Of Insider Transactions At Viva Biotech Holdings

The insider, Jiong Wu, made the biggest insider sale in the last 12 months. That single transaction was for HK$44m worth of shares at a price of HK$4.42 each. That means that an insider was selling shares at slightly below the current price (HK$7.48). 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. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. It is worth noting that this sale was only 4.0% of Jiong Wu's holding. Jiong Wu was the only individual insider to sell over the last year.

Happily, we note that in the last year insiders paid HK$25m for 3.13m shares. On the other hand they divested 18.00m shares, for HK$92m. Jiong Wu divested 18.00m shares over the last 12 months at an average price of CN¥5.11. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

I will like Viva Biotech Holdings better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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. A high insider ownership often makes company leadership more mindful of shareholder interests. It's great to see that Viva Biotech Holdings insiders own 39% of the company, worth about HK$5.6b. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

So What Does This Data Suggest About Viva Biotech Holdings Insiders?

There haven't been any insider transactions in the last three months -- that doesn't mean much. While we feel good about high insider ownership of Viva Biotech Holdings, we can't say the same about the selling of shares. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. In terms of investment risks, we've identified 1 warning sign with Viva Biotech Holdings and understanding it should be part of your investment process.

But note: Viva Biotech Holdings 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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This article by Simply Wall St is general in nature. 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.
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