We wouldn't blame Rackspace Technology, Inc. (NASDAQ:RXT) shareholders if they were a little worried about the fact that Dhiren Fonseca, the Independent Non-Employee Director recently netted about US$1.4m selling shares at an average price of US$21.18. That sale reduced their total holding by 30% which is hardly insignificant, but far from the worst we've seen.
Rackspace Technology Insider Transactions Over The Last Year
Notably, that recent sale by Dhiren Fonseca is the biggest insider sale of Rackspace Technology shares that we've seen in the last year. So we know that an insider sold shares at around the present share price of US$20.86. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. We note that this sale took place at around the current price, so it isn't a major concern, though it's hardly a good sign.
In the last twelve months insiders purchased 14.80k shares for US$275k. On the other hand they divested 80.28k shares, for US$1.7m. Over the last year we saw more insider selling of Rackspace Technology shares, than buying. 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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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. Rackspace Technology insiders own 8.1% of the company, currently worth about US$352m based on the recent share price. 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 Do The Rackspace Technology Insider Transactions Indicate?
The insider sales have outweighed the insider buying, at Rackspace Technology, in the last three months. And our longer term analysis of insider transactions didn't bring confidence, either. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. In terms of investment risks, we've identified 1 warning sign with Rackspace Technology and understanding it should be part of your investment process.
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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, but not derivative transactions.
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