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 shareholders might well want to know whether insiders have been buying or selling shares in Arena Pharmaceuticals, Inc. (NASDAQ:ARNA).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a 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 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'.
Arena Pharmaceuticals Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the Executive VP & Chief Commercial Officer, Robert Lisicki, sold US$256k worth of shares at a price of US$66.72 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$74.32. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was 100% of Robert Lisicki's holding. Robert Lisicki was the only individual insider to sell over the last year.
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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Insiders at Arena Pharmaceuticals Have Sold Stock Recently
There was substantially more insider selling, than buying, of Arena Pharmaceuticals shares over the last three months. In total, Executive VP & Chief Commercial Officer Robert Lisicki sold US$256k worth of shares in that time. Meanwhile Independent Director Jayson Donald Dallas bought US$678 worth , as we said above . We don't view these transactions as a positive sign.
Does Arena Pharmaceuticals Boast High Insider Ownership?
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. Insiders own 0.2% of Arena Pharmaceuticals shares, worth about US$7.4m, according to our data. We do generally prefer see higher levels of insider ownership.
What Might The Insider Transactions At Arena Pharmaceuticals Tell Us?
The insider sales have outweighed the insider buying, at Arena Pharmaceuticals, in the last three months. And our longer term analysis of insider transactions didn't bring confidence, either. When you combine this with the relatively low insider ownership, we are very cautious about the stock. So we're not rushing to buy, to say the least. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Arena Pharmaceuticals. In terms of investment risks, we've identified 4 warning signs with Arena Pharmaceuticals and understanding these should be part of your investment process.
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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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This article by Simply Wall St is general in nature. 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.
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