Possible Bearish Signals With Cloudflare Insiders Disposing Stock

In the last year, many Cloudflare, Inc. (NYSE:NET) insiders sold a substantial stake in the company which may have sparked shareholders' attention. Knowing whether insiders are buying is usually more helpful when evaluating insider transactions, as insider selling can have various explanations. However, if numerous insiders are selling, shareholders should investigate more.

Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.

View our latest analysis for Cloudflare

The Last 12 Months Of Insider Transactions At Cloudflare

In the last twelve months, the biggest single sale by an insider was when the Independent Director, Carl Ledbetter, sold US$2.1m worth of shares at a price of US$68.65 per share. That means that even when the share price was below the current price of US$120, 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 2.6% of Carl Ledbetter's holding.

Insiders in Cloudflare didn't buy any shares in the last year. The chart below shows insider transactions (by companies and individuals) over the last year. 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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Insiders At Cloudflare Have Sold Stock Recently

The last three months saw significant insider selling at Cloudflare. In total, Co-Founder Matthew Prince sold US$1.1m 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?

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that Cloudflare insiders own 11% of the company, worth about US$4.4b. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Do The Cloudflare Insider Transactions Indicate?

An insider sold Cloudflare shares recently, but they didn't buy any. Looking to the last twelve months, our data doesn't show any insider buying. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. In terms of investment risks, we've identified 1 warning sign with Cloudflare and understanding it should be part of your investment process.

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.

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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.