Selling Phathom Pharmaceuticals Shares at a Lower Price Than Current Market Value May Have Been a Costly Mistake for Insiders

Despite the fact that Phathom Pharmaceuticals, Inc.'s (NASDAQ:PHAT) value has dropped 26% in the last week insiders who sold US$854k worth of stock in the past 12 months have had less success. The average selling price of US$9.65 is still lower than the current share price, or in other words, insiders would have been better off holding on to their shares.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

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Phathom Pharmaceuticals Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the insider, Terrie Curran, for US$397k worth of shares, at about US$11.72 per share. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. The silver lining is that this sell-down took place above the latest price (US$4.88). So it may not tell us anything about how insiders feel about the current share price.

Happily, we note that in the last year insiders paid US$225k for 32.50k shares. But they sold 88.50k shares for US$854k. In total, Phathom Pharmaceuticals insiders sold more than they bought over the last year. The sellers received a price of around US$9.65, on average. Insider selling doesn't make us excited to buy. However, we do note that the average sale price was significantly higher than the current share price (which is US$4.88). You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!

See our latest analysis for Phathom Pharmaceuticals

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Insiders At Phathom Pharmaceuticals Have Sold Stock Recently

Over the last three months, we've seen notably more insider selling, than insider buying, at Phathom Pharmaceuticals. In that time, insiders dumped US$221k worth of shares. On the flip side, Independent Director Asit Parikh spent US$44k on purchasing shares. The share price has moved a bit recently, but it's hard to argue that the selling is a positive.

Insider Ownership Of Phathom Pharmaceuticals

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. It appears that Phathom Pharmaceuticals insiders own 3.8% of the company, worth about US$13m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

So What Do The Phathom Pharmaceuticals Insider Transactions Indicate?

The insider sales have outweighed the insider buying, at Phathom Pharmaceuticals, in the last three months. And our longer term analysis of insider transactions didn't bring confidence, either. While insiders do own shares, they don't own a heap, and they have been selling. We'd practice some caution before buying! So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Our analysis shows 4 warning signs for Phathom Pharmaceuticals (1 makes us a bit uncomfortable!) and we strongly recommend you look at them before investing.

But note: Phathom Pharmaceuticals may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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 of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.