Possible bearish signals as TowneBank (NASDAQ:TOWN) insiders disposed of US$2.8m worth of stock

Over the past year, many TowneBank (NASDAQ:TOWN) insiders sold a significant stake in the company which may have piqued investors' interest. When evaluating insider transactions, knowing whether insiders are buying versus if they selling is usually more beneficial, as the latter can be open to many interpretations. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

While insider transactions are not the most important thing when it comes to long-term investing, we do think it is perfectly logical to keep tabs on what insiders are doing.

See our latest analysis for TowneBank

TowneBank Insider Transactions Over The Last Year

In the last twelve months, the biggest single purchase by an insider was when Independent Director William Lewis bought US$998k worth of shares at a price of US$27.71 per share. That implies that an insider found the current price of US$30.74 per share to be enticing. Of course they may have changed their mind. But this suggests they are optimistic. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. The good news for TowneBank share holders is that insiders were buying at near the current price.

In the last twelve months insiders purchased 63.49k shares for US$1.8m. But insiders sold 90.83k shares worth US$2.8m. Over the last year we saw more insider selling of TowneBank shares, than buying. 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!

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).

Insiders At TowneBank Have Sold Stock Recently

We've seen more insider selling than insider buying at TowneBank recently. In that time, insiders dumped US$1.0m worth of shares. On the other hand we note insiders bought US$24k worth of shares. Since the selling really does outweigh the buying, we'd say that these transactions may suggest that some insiders feel the shares are not cheap.

Does TowneBank Boast High Insider Ownership?

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. TowneBank insiders own 8.4% of the company, currently worth about US$185m based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

What Might The Insider Transactions At TowneBank Tell Us?

The insider sales have outweighed the insider buying, at TowneBank, in the last three months. And our longer term analysis of insider transactions didn't bring confidence, either. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. While conducting our analysis, we found that TowneBank has 1 warning sign and it would be unwise to ignore this.

But note: TowneBank 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. 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.