Honest Company Insiders Sold US$6.8m Of Shares Suggesting Hesitancy

The fact that multiple The Honest Company, Inc. (NASDAQ:HNST) insiders offloaded a considerable amount of shares over the past year could have raised some eyebrows amongst investors. When evaluating insider transactions, knowing whether insiders are buying is usually more beneficial than knowing whether they are selling, 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.

Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.

Check out our latest analysis for Honest Company

The Last 12 Months Of Insider Transactions At Honest Company

In the last twelve months, the biggest single sale by an insider was when the Founder & Director, Jessica Warren, sold US$2.4m worth of shares at a price of US$3.07 per share. That means that even when the share price was below the current price of US$6.33, an insider wanted to cash in some shares. 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. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was only 13% of Jessica Warren's holding.

Insiders in Honest Company didn't buy any shares in the last year. 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!

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Honest Company Insiders Are Selling The Stock

The last three months saw significant insider selling at Honest Company. In total, insiders sold US$2.0m worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.

Does Honest Company Boast High Insider Ownership?

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 9.8% of Honest Company shares, worth about US$65m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

What Might The Insider Transactions At Honest Company Tell Us?

Insiders haven't bought Honest Company stock in the last three months, but there was some selling. And even if we look at the last year, we didn't see any purchases. While insiders do own shares, they don't own a heap, and they have been selling. So we'd only buy after careful consideration. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Honest Company. You'd be interested to know, that we found 3 warning signs for Honest Company and we suggest you have a look.

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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.