Need To Know: African Rainbow Minerals Limited (JSE:ARI) Insiders Have Been Selling Shares

It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell African Rainbow Minerals Limited (JSE:ARI), you may well want to know whether insiders have been buying or selling.

Do Insider Transactions Matter?

Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the 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 it is perfectly logical to keep tabs on what insiders are doing. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise'.

Check out our latest analysis for African Rainbow Minerals

The Last 12 Months Of Insider Transactions At African Rainbow Minerals

In the last twelve months, the biggest single sale by an insider was when the Non-Executive Director, Michael Arnold, sold R9.5m worth of shares at a price of R239 per share. So it's clear an insider wanted to take some cash off the table, even slightly below the current price of R241. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. 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 25% of Michael Arnold's stake.

In the last year African Rainbow Minerals insiders didn't buy any company stock. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).

African Rainbow Minerals Insiders Are Selling The Stock

The last quarter saw substantial insider selling of African Rainbow Minerals shares. In total, insiders dumped R23m 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.

Insider Ownership of African Rainbow Minerals

Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 0.8% of African Rainbow Minerals shares, worth about R360m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

What Might The Insider Transactions At African Rainbow Minerals Tell Us?

Insiders haven't bought African Rainbow Minerals stock in the last three months, but there was some selling. And even if we look at the last year, we didn't see any purchases. On the plus side, African Rainbow Minerals makes money, and is growing profits. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. 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. For example - African Rainbow Minerals has 2 warning signs we think you should be aware of.

Of course African Rainbow Minerals may not be the best stock to buy. So you may wish to see this free collection of high quality 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, but not derivative transactions.

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This article by Simply Wall St is general in nature. 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.
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