Insiders At Root Sold US$1.2m In Stock, Alluding To Potential Weakness

Quite a few Root, Inc. (NASDAQ:ROOT) insiders sold their shares over the past year, which may be a cause for concern. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. However, if numerous insiders are selling, shareholders should investigate more.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

Check out our latest analysis for Root

Root Insider Transactions Over The Last Year

The Chief Administrative Officer, Jonathan Allison, made the biggest insider sale in the last 12 months. That single transaction was for US$433k worth of shares at a price of US$78.70 each. That means that an insider was selling shares at slightly below the current price (US$99.81). We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. This single sale was just 7.8% of Jonathan Allison's stake.

Root insiders didn't buy any shares over the last year. The chart below shows insider transactions (by companies and individuals) over the last year. 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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Root Insiders Are Selling The Stock

Over the last three months, we've seen significant insider selling at Root. In total, insiders sold US$1.0m 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.

Does Root 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. We usually like to see fairly high levels of insider ownership. It's great to see that Root insiders own 20% of the company, worth about US$308m. 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 Does This Data Suggest About Root Insiders?

Insiders haven't bought Root 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. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. 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. For instance, we've identified 3 warning signs for Root (1 is significant) you should be aware of.

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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.