We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Sea Limited (NYSE:SE).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.
We don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
Sea Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Founder, Forrest Xiaodong Li, for US$6.8m worth of shares, at about US$52.00 per share. That means that an insider was selling shares at slightly below the current price (US$220). As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. 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. It is worth noting that this sale was 100% of Forrest Xiaodong Li's holding. Forrest Xiaodong Li was the only individual insider to sell shares in the last twelve months.
You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
I will like Sea better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insider Ownership of Sea
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. It's great to see that Sea insiders own 16% of the company, worth about US$18b. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Sea Tell Us?
It doesn't really mean much that no insider has traded Sea shares in the last quarter. It's great to see high levels of insider ownership, but looking back over the last year, we don't gain confidence from the Sea insiders selling. 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. Case in point: We've spotted 2 warning signs for Sea 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, but not derivative transactions.
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