It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Arena Pharmaceuticals, Inc. (NASDAQ:ARNA).
What Is Insider Buying?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
The Last 12 Months Of Insider Transactions At Arena Pharmaceuticals
The Executive VP & Chief Commercial Officer, Robert Lisicki, made the biggest insider sale in the last 12 months. That single transaction was for US$256k worth of shares at a price of US$66.72 each. So we know that an insider sold shares at around the present share price of US$66.29. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. We note that this sale took place at around the current price, so it isn't a major concern, though it's hardly a good sign. Robert Lisicki 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 click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like Arena Pharmaceuticals better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. Our data indicates that Arena Pharmaceuticals insiders own about US$9.8m worth of shares (which is 0.2% of the company). We do generally prefer see higher levels of insider ownership.
What Might The Insider Transactions At Arena Pharmaceuticals Tell Us?
It doesn't really mean much that no insider has traded Arena Pharmaceuticals shares in the last quarter. The insider transactions at Arena Pharmaceuticals are not inspiring us to buy. And usually insiders own more stock in the company, according to our data. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Be aware that Arena Pharmaceuticals is showing 4 warning signs in our investment analysis, and 1 of those is a bit concerning...
Of course Arena Pharmaceuticals 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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