It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Pacific Mercantile Bancorp (NASDAQ:PMBC), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.
Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. 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'.
The Last 12 Months Of Insider Transactions At Pacific Mercantile Bancorp
Over the last year, we can see that the biggest insider purchase was by CEO, President & Director Bradford Dinsmore for US$131k worth of shares, at about US$5.43 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of US$7.64. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
In the last twelve months insiders purchased 101.59k shares for US$407k. But they sold 11.69k shares for US$69k. In the last twelve months there was more buying than selling by Pacific Mercantile Bancorp insiders. Their average price was about US$4.00. To my mind it is good that insiders have invested their own money in the company. However, you should keep in mind that they bought when the share price was meaningfully below today's levels. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Pacific Mercantile Bancorp Insiders Are Selling The Stock
Over the last three months, we've seen significant insider selling at Pacific Mercantile Bancorp. In total, insiders sold US$51k worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
Insider Ownership of Pacific Mercantile Bancorp
For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. From our data, it seems that Pacific Mercantile Bancorp insiders own 3.4% of the company, worth about US$5.7m. We do generally prefer see higher levels of insider ownership.
So What Do The Pacific Mercantile Bancorp Insider Transactions Indicate?
Insiders sold Pacific Mercantile Bancorp shares recently, but they didn't buy any. On the other hand, the insider transactions over the last year are encouraging. But we'd like it if insiders owned more stock, overall. So overall it's hard to argue insiders are bullish. 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. Case in point: We've spotted 2 warning signs for Pacific Mercantile Bancorp you should be aware of.
But note: Pacific Mercantile Bancorp 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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