Open Text Insiders Sell US$27m Of Stock, Possibly Signalling Caution

The fact that multiple Open Text Corporation (NASDAQ:OTEX) insiders offloaded a considerable amount of shares over the past year could have raised some eyebrows amongst investors. 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 we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

View our latest analysis for Open Text

The Last 12 Months Of Insider Transactions At Open Text

Over the last year, we can see that the biggest insider sale was by the Vice Chairman, Mark Barrenechea, for US$16m worth of shares, at about US$41.30 per share. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. It's of some comfort that this sale was conducted at a price well above the current share price, which is US$28.57. So it may not tell us anything about how insiders feel about the current share price.

Open Text 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!

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Open Text Insiders Are Selling The Stock

Over the last three months, we've seen significant insider selling at Open Text. In total, insiders sold US$2.9m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.

Does Open Text 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. I reckon it's a good sign if insiders own a significant number of shares in the company. Open Text insiders own about US$146m worth of shares (which is 1.9% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

What Might The Insider Transactions At Open Text Tell Us?

Insiders sold Open Text shares recently, but they didn't buy any. And even if we look at the last year, we didn't see any purchases. On the plus side, Open Text makes money, and is growing profits. 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. Our analysis shows 3 warning signs for Open Text (1 is potentially serious!) and we strongly recommend you look at them before investing.

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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.