Insiders Could Have Profited By Holding onto loanDepot Shares Despite 13% Drop

loanDepot, Inc.'s (NYSE:LDI) stock price has dropped 13% in the previous week, but insiders who sold US$3.5m in stock over the past year have had less luck. The average selling price of US$2.05 is still lower than the current share price, or in other words, insiders would have been better off holding on to their shares.

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.

Check out our latest analysis for loanDepot

The Last 12 Months Of Insider Transactions At loanDepot

Notably, that recent sale by Founder & Chairman Anthony Hsieh was not the only time they sold loanDepot shares this year. They previously made an even bigger sale of -US$917k worth of shares at a price of US$2.18 per share. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. The silver lining is that this sell-down took place above the latest price (US$1.80). So it may not tell us anything about how insiders feel about the current share price.

Anthony Hsieh ditched 1.71m shares over the year. The average price per share was US$2.05. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

For those who like to find hidden gems this free list of small cap companies with recent insider purchasing, could be just the ticket.

Insiders At loanDepot Have Sold Stock Recently

There was substantially more insider selling, than buying, of loanDepot shares over the last three months. We note Founder & Chairman Anthony Hsieh cashed in US$3.5m worth of shares. Meanwhile CEO, President & Director Frank Martell bought US$297k worth. The share price has moved a bit recently, but it's hard to argue that the selling is a positive.

Insider Ownership Of loanDepot

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. Insiders own 5.0% of loanDepot shares, worth about US$29m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.

What Might The Insider Transactions At loanDepot Tell Us?

The stark truth for loanDepot is that there has been more insider selling than insider buying in the last three months. And our longer term analysis of insider transactions didn't bring confidence, either. Insiders own shares, but we're still pretty cautious, given the history of sales. We'd practice some caution before buying! While it's good to be aware of 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. In terms of investment risks, we've identified 2 warning signs with loanDepot and understanding these should be part of your investment process.

But note: loanDepot 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com