Selling US$12m Of Stock Was Lucrative Decision For Applied Digital Insiders

Despite a 32% gain in Applied Digital Corporation's (NASDAQ:APLD) stock price this week, shareholders shouldn't let up. Even though stock prices were relatively low, insiders elected to sell US$12m worth of stock in the last year, which could indicate some expected downturn.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.

View our latest analysis for Applied Digital

The Last 12 Months Of Insider Transactions At Applied Digital

Over the last year, we can see that the biggest insider sale was by the insider, Jason Zhang, for US$8.5m worth of shares, at about US$4.84 per share. That means that even when the share price was below the current price of US$9.95, an insider wanted to cash in some shares. 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. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. We note that the biggest single sale was only 25% of Jason Zhang's holding.

Applied Digital insiders didn't buy any shares over the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: Most of them are flying under the radar).

Insiders At Applied Digital Have Sold Stock Recently

The last quarter saw substantial insider selling of Applied Digital shares. In total, insiders dumped US$2.5m worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.

Insider Ownership Of Applied Digital

Many investors like to check how much of a company is owned by 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. Applied Digital insiders own about US$412m worth of shares (which is 19% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Does This Data Suggest About Applied Digital Insiders?

Insiders sold Applied Digital shares recently, but they didn't buy any. And even if we look at the last year, we didn't see any purchases. It is good to see high insider ownership, but the insider selling leaves us cautious. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. At Simply Wall St, we've found that Applied Digital has 5 warning signs (2 make us uncomfortable!) that deserve your attention before going any further with your analysis.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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.