Lemonade, Inc.'s (NYSE:LMND)) market cap declines to US$1.5b but insiders who sold US$4.8m stock were able to hedge their losses

By
Simply Wall St
Published
April 13, 2022
NYSE:LMND
Source: Shutterstock

Insiders at Lemonade, Inc. (NYSE:LMND) sold US$4.8m worth of stock at an average price of US$77.42 a share over the past year, making the most of their investment. The company’s market cap plunged by US$191m after price dropped by 11% last week but insiders were able to limit their loss to an extent.

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

View our latest analysis for Lemonade

The Last 12 Months Of Insider Transactions At Lemonade

The Lead Independent Director, Michael Eisenberg, made the biggest insider sale in the last 12 months. That single transaction was for US$2.0m worth of shares at a price of US$107 each. 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$24.25). So it may not tell us anything about how insiders feel about the current share price. The only individual insider seller over the last year was Michael Eisenberg.

Michael Eisenberg sold a total of 62.50k shares over the year at an average price of US$77.42. 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!

insider-trading-volume
NYSE:LMND Insider Trading Volume April 13th 2022

I will like Lemonade better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Lemonade Insiders Are Selling The Stock

Over the last three months, we've seen significant insider selling at Lemonade. In total, Lead Independent Director Michael Eisenberg dumped US$264k 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.

Insider Ownership of Lemonade

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. Lemonade insiders own 6.9% of the company, currently worth about US$103m based on the recent share price. 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 Lemonade Insiders?

An insider sold stock recently, but they haven't been buying. And there weren't any purchases to give us comfort, over the last year. 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. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Lemonade. For example, Lemonade has 4 warning signs (and 1 which is a bit unpleasant) we think you should know about.

Of course Lemonade 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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