Insiders Re-Evaluate Their US$5.05m Stock Purchase As Terns Pharmaceuticals Falls To US$556m

Insiders who acquired US$5.05m worth of Terns Pharmaceuticals, Inc.'s (NASDAQ:TERN) stock at an average price of US$10.36 in the past 12 months may be dismayed by the recent 15% price decline. This is not good as insiders invest based on expectations that their money will appreciate over time. However, as a result of recent losses, their original investment is now worth only US$3.01m.

Although we don't think shareholders should simply follow insider transactions, we do think it is perfectly logical to keep tabs on what insiders are doing.

Check out our latest analysis for Terns Pharmaceuticals

Terns Pharmaceuticals Insider Transactions Over The Last Year

The Independent Director Hongbo Lu made the biggest insider purchase in the last 12 months. That single transaction was for US$5.0m worth of shares at a price of US$10.50 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being US$6.17). It's very possible they regret the purchase, but it's more likely they are bullish about the company. We always take careful note of the price insiders pay when purchasing shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.

In the last twelve months insiders purchased 487.26k shares for US$5.0m. But insiders sold 6.14k shares worth US$47k. Overall, Terns Pharmaceuticals insiders were net buyers during the last year. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

There are always plenty of stocks that insiders are buying. If investing in lesser known companies is your style, you could take a look at this free list of companies. (Hint: insiders have been buying them).

Terns Pharmaceuticals Insiders Bought Stock Recently

Over the last three months, we've seen significant insider buying at Terns Pharmaceuticals. Specifically, Independent Director Hongbo Lu bought US$5.0m worth of shares in that time, and we didn't record any sales whatsoever. This makes one think the business has some good points.

Insider Ownership Of Terns Pharmaceuticals

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it's a good sign if insiders own a significant number of shares in the company. From looking at our data, insiders own US$3.6m worth of Terns Pharmaceuticals stock, about 0.6% of the company. We consider this fairly low insider ownership.

What Might The Insider Transactions At Terns Pharmaceuticals Tell Us?

It's certainly positive to see the recent insider purchase. And the longer term insider transactions also give us confidence. But we don't feel the same about the fact the company is making losses. We would certainly prefer see higher levels of insider ownership but analysis of the insider transactions suggests that Terns Pharmaceuticals insiders are expecting a bright future. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Terns Pharmaceuticals. At Simply Wall St, we've found that Terns Pharmaceuticals has 5 warning signs (2 don't sit too well with us!) that deserve your attention before going any further with your analysis.

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 of direct interests only, but not derivative transactions or indirect interests.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.