Insiders At Verastem Sold US$783k In Stock, Alluding To Potential Weakness

Verastem, Inc. (NASDAQ:VSTM) shareholders may have reason to be concerned, as several insiders sold their shares over the past year. Knowing whether insiders are buying is usually more helpful when evaluating insider transactions, as insider selling can have various explanations. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

While insider transactions are not the most important thing when it comes to long-term investing, we do think it is perfectly logical to keep tabs on what insiders are doing.

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The Last 12 Months Of Insider Transactions At Verastem

Over the last year, we can see that the biggest insider sale was by the President, Daniel Paterson, for US$477k worth of shares, at about US$8.13 per share. That means that even when the share price was below the current price of US$8.61, an insider wanted to cash in some shares. 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. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was only 24% of Daniel Paterson's holding.

Verastem insiders didn't buy any shares 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!

See our latest analysis for Verastem

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Insiders At Verastem Have Sold Stock Recently

The last three months saw some Verastem insider selling. Insiders divested only US$20k worth of shares in that time. Neither the lack of buying nor the presence of selling is heartening. But the volume sold is so low that it really doesn't bother us.

Does Verastem Boast High Insider Ownership?

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Our data suggests Verastem insiders own 0.7% of the company, worth about US$4.1m. We consider this fairly low insider ownership.

So What Does This Data Suggest About Verastem Insiders?

Our data shows a little more insider selling, but no insider buying, in the last three months. However, the sales are not big enough to concern us at all. Recent insider selling makes us a little nervous, in light of the broader picture of Verastem insider transactions. 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. For example, Verastem has 4 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

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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 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.