Cloudflare Insiders Sell US$2.5m Of Stock, Possibly Signalling Caution

In the last year, many Cloudflare, Inc. (NYSE:NET) insiders sold a substantial stake in the company which may have sparked shareholders' attention. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. 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, logic dictates you should pay some attention to whether insiders are buying or selling shares.

View our latest analysis for Cloudflare

Cloudflare Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the Lead Independent Director, Scott Sandell, for US$1.3m worth of shares, at about US$66.57 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$74.19. 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. This single sale was just 4.4% of Scott Sandell's stake.

Insiders in Cloudflare didn't buy any shares in the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

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 Cloudflare Have Sold Stock Recently

The last quarter saw substantial insider selling of Cloudflare shares. In total, Co-Founder Matthew Prince dumped US$1.2m 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 Cloudflare Boast High Insider Ownership?

For a common shareholder, it is worth checking how many shares are held by company 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. Cloudflare insiders own 12% of the company, currently worth about US$2.9b based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

What Might The Insider Transactions At Cloudflare Tell Us?

An insider sold Cloudflare shares recently, but they didn't buy any. And even if we look at the last year, we didn't see any purchases. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Case in point: We've spotted 3 warning signs for Cloudflare you should be aware of.

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.