Insiders' S$13.0m Investments In Red Following mm2 Asia's S$13m Dip In Market Value

The recent price decline of 12% in mm2 Asia Ltd.'s (SGX:1B0) stock may have disappointed insiders who bought S$13.0m worth of shares at an average price of S$0.017 in the past 12 months. Insiders buy with the expectation to see their investments rise in value over a period of time. However, recent losses have rendered their above investment worth S$11.5m which is not ideal.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

See our latest analysis for mm2 Asia

The Last 12 Months Of Insider Transactions At mm2 Asia

In the last twelve months, the biggest single purchase by an insider was when insider Jingwei Zhang bought S$13m worth of shares at a price of S$0.017 per share. That means that even when the share price was higher than S$0.015 (the recent price), an insider wanted to purchase shares. It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. It is encouraging to see an insider paid above the current price for shares, as it suggests they saw value, even at higher levels. The only individual insider to buy over the last year was Jingwei Zhang.

You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.

Does mm2 Asia Boast High Insider Ownership?

For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. mm2 Asia insiders own 44% of the company, currently worth about S$43m based on the recent share price. 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 Do The mm2 Asia Insider Transactions Indicate?

It is good to see the recent insider purchase. And an analysis of the transactions over the last year also gives us confidence. But on the other hand, the company made a loss during the last year, which makes us a little cautious. When combined with notable insider ownership, these factors suggest mm2 Asia insiders are well aligned, and quite possibly think the share price is too low. That's what I like to see! So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. For example, mm2 Asia has 3 warning signs (and 1 which is significant) we think you should know about.

But note: mm2 Asia 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.