Lemonade Insiders May Regret Not Buying More, Market Cap Hits US$1.7b

Last week, Lemonade, Inc. (NYSE:LMND) insiders, who had purchased shares in the previous 12 months were rewarded handsomely. The shares increased by 29% last week, resulting in a US$388m increase in the company's market worth, implying a 52% gain on their initial purchase. As a result, their original purchase of US$470.1k worth of stock is now worth US$713.1k.

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.

See our latest analysis for Lemonade

Lemonade Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider purchase was by CFO & Principal Accounting Officer Timothy Bixby for US$305k worth of shares, at about US$15.51 per share. Even though the purchase was made at a significantly lower price than the recent price (US$23.77), we still think insider buying is a positive. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.

Timothy Bixby purchased 30.00k shares over the year. The average price per share was US$15.67. 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!

Lemonade is not the only stock that insiders are buying. For those who like to find small cap companies at attractive valuations, this free list of growing companies with recent insider purchasing, could be just the ticket.

Insiders At Lemonade Have Sold Stock Recently

The last quarter saw substantial insider selling of Lemonade shares. In total, insiders dumped US$71k worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.

Insider Ownership Of Lemonade

Many investors like to check how much of a company is owned by 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 about US$96m worth of shares. That equates to 5.7% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

So What Do The Lemonade Insider Transactions Indicate?

Insiders sold Lemonade shares recently, but they didn't buy any. On the other hand, the insider transactions over the last year are encouraging. It's good to see insiders are shareholders. So the recent selling doesn't worry us too much. 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 example - Lemonade has 2 warning signs we think you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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 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.