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 before you buy or sell BridgeBio Pharma, Inc. (NASDAQ:BBIO), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
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, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise'.
BridgeBio Pharma Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the Chairman of Oncology, Frank McCormick, sold US$4.3m worth of shares at a price of US$43.57 per share. That means that an insider was selling shares at slightly below the current price (US$63.13). 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. This single sale was just 7.7% of Frank McCormick's stake.
Happily, we note that in the last year insiders paid US$1.5m for 24.00k shares. On the other hand they divested 192.57k shares, for US$10m. In total, BridgeBio Pharma insiders sold more than they bought over the last year. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
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I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. BridgeBio Pharma insiders own about US$706m worth of shares (which is 7.5% of the company). 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 BridgeBio Pharma Insider Transactions Indicate?
The fact that there have been no BridgeBio Pharma insider transactions recently certainly doesn't bother us. While we feel good about high insider ownership of BridgeBio Pharma, we can't say the same about the selling of shares. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. For instance, we've identified 4 warning signs for BridgeBio Pharma (1 is a bit concerning) 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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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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