Possible Bearish Signals With Cogent Communications Holdings Insiders Disposing Stock

Many Cogent Communications Holdings, Inc. (NASDAQ:CCOI) insiders ditched their stock over the past year, which may be of interest to the company's shareholders. 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, we would consider it foolish to ignore insider transactions altogether.

See our latest analysis for Cogent Communications Holdings

Cogent Communications Holdings Insider Transactions Over The Last Year

The Founder, David Schaeffer, made the biggest insider sale in the last 12 months. That single transaction was for US$5.8m worth of shares at a price of US$68.12 each. That means that an insider was selling shares at slightly below the current price (US$73.07). When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. It is worth noting that this sale was only 1.8% of David Schaeffer's holding.

All up, insiders sold more shares in Cogent Communications Holdings than they bought, 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!

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Cogent Communications Holdings Insiders Are Selling The Stock

The last three months saw significant insider selling at Cogent Communications Holdings. Specifically, insiders ditched US$510k worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.

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. Cogent Communications Holdings insiders own about US$369m worth of shares (which is 11% of the company). 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 Cogent Communications Holdings Insider Transactions Indicate?

Insiders sold Cogent Communications Holdings shares recently, but they didn't buy any. Despite some insider buying, the longer term picture doesn't make us feel much more positive. It is good to see high insider ownership, but the insider selling leaves us cautious. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Cogent Communications Holdings. Case in point: We've spotted 3 warning signs for Cogent Communications Holdings you should be aware of, and 2 of these are a bit concerning.

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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.