We wouldn't blame Chegg, Inc. (NYSE:CHGG) shareholders if they were a little worried about the fact that Robin Tomasello, the Principal Accounting Officer recently netted about US$2.3m selling shares at an average price of US$71.45. That sale reduced their total holding by 37% which is hardly insignificant, but far from the worst we've seen.
The Last 12 Months Of Insider Transactions At Chegg
Over the last year, we can see that the biggest insider sale was by the President of Learning Services, Nathan Schultz, for US$4.0m worth of shares, at about US$37.38 per share. That means that an insider was selling shares at slightly below the current price (US$72.57). When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. It is worth noting that this sale was only 30% of Nathan Schultz's holding.
Over the last year we saw more insider selling of Chegg shares, than buying. 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!
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Insider Ownership of Chegg
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. We usually like to see fairly high levels of insider ownership. It's great to see that Chegg insiders own 3.1% of the company, worth about US$272m. 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 Chegg Insider Transactions Indicate?
An insider hasn't bought Chegg stock in the last three months, but there was some selling. Zooming out, the longer term picture doesn't give us much comfort. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. In terms of investment risks, we've identified 2 warning signs with Chegg and understanding them should be part of your investment process.
Of course Chegg may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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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