It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So before you buy or sell Urban One, Inc. (NASDAQ:UONE.K), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
The Last 12 Months Of Insider Transactions At Urban One
The Chairperson of the Board & Secretary, Catherine Hughes, made the biggest insider sale in the last 12 months. That single transaction was for US$3.6m worth of shares at a price of US$4.75 each. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. The good news is that this large sale was at well above current price of US$1.41. So it may not shed much light on insider confidence at current levels.
In total, Urban One insiders sold more than they bought over the last year. The average sell price was around US$3.48. We are not joyful about insider selling. But we note that the selling, on average, was at well above the recently traded price of US$1.41. 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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Urban One Insiders Bought Stock Recently
Over the last three months, we've seen significant insider buying at Urban One. CEO, President Alfred Liggins spent US$1.2m on stock, and there wasn't any selling. This is a positive in our book as it implies some confidence.
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. Urban One insiders own 51% of the company, currently worth about US$43m 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 Do The Urban One Insider Transactions Indicate?
The recent insider purchase is heartening. However, the longer term transactions are not so encouraging. The recent buying by an insider , along with high insider ownership, suggest that Urban One insiders are fairly aligned, and optimistic. 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. To that end, you should learn about the 4 warning signs we've spotted with Urban One (including 1 which is a bit unpleasant).
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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, but not derivative transactions.
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