We often see insiders buying up shares in companies that perform well over the long term. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So we'll take a look at whether insiders have been buying or selling shares in Identiv, Inc. (NASDAQ:INVE).
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
The Last 12 Months Of Insider Transactions At Identiv
Over the last year, we can see that the biggest insider sale was by the Independent Director, Nina Shapiro, for US$111k worth of shares, at about US$7.38 per share. That means that even when the share price was below the current price of US$11.51, 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 24% of Nina Shapiro's holding.
Identiv insiders didn't buy any shares over 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!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insider Ownership of Identiv
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. Our data indicates that Identiv insiders own about US$9.0m worth of shares (which is 4.3% of the company). Overall, this level of ownership isn't that impressive, but it's certainly better than nothing!
So What Do The Identiv Insider Transactions Indicate?
It doesn't really mean much that no insider has traded Identiv shares in the last quarter. We don't take much encouragement from the transactions by Identiv insiders. And we're not picking up on high enough insider ownership to give us any comfort. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. You'd be interested to know, that we found 2 warning signs for Identiv and we suggest you have a look.
But note: Identiv may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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, but not derivative transactions.
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