Multiple Insiders Sold Sonata Software Shares Presenting Weak Signs For Investors

Sonata Software Limited (NSE:SONATSOFTW) shareholders may have reason to be concerned, as several insiders sold their shares over the past year. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.

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The Last 12 Months Of Insider Transactions At Sonata Software

The Executive Vice Chairman & Whole-Time Director, Palem Reddy, made the biggest insider sale in the last 12 months. That single transaction was for ₹18m worth of shares at a price of ₹617 each. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. It's of some comfort that this sale was conducted at a price well above the current share price, which is ₹393. So it may not shed much light on insider confidence at current levels.

Sonata Software insiders didn't buy any shares over the last year. 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!

See our latest analysis for Sonata Software

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Insider Ownership Of Sonata Software

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. It's great to see that Sonata Software insiders own 38% of the company, worth about ₹41b. 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 Sonata Software Tell Us?

It doesn't really mean much that no insider has traded Sonata Software shares in the last quarter. It's great to see high levels of insider ownership, but looking back over the last year, we don't gain confidence from the Sonata Software insiders selling. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Sonata Software. While conducting our analysis, we found that Sonata Software has 1 warning sign and it would be unwise to ignore it.

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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.