We often see insiders buying back shares of companies that are performing well over the long term. The flip side is that there are more than a few examples of insiders dumping their stocks before a period of poor performance. Shareholders might therefore want to know if any insiders bought or sold shares of Bingo Industries Limited (ASX: BIN).
What is insider selling?
Most investors know that it is okay for business executives, such as directors of the board of directors, to buy and sell company stock. However, most countries require the company to disclose these transactions to the market.
We don’t believe shareholders should just follow insider trading. But in the same way, we would consider it foolish to ignore insider trading altogether. For example, a Harvard university to study found that “insider buying generates abnormal returns of over 6% per year.”
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Bingo Industries Insider Trading Over the Past Year
In the past twelve months, the biggest sale by an insider was when the non-executive director, Ian Malouf, sold A $ 5.8 million of shares at a price of A $ 2.70 per share. This means that an insider was selling shares for a price slightly lower than the current price (AU $ 3.43). When an insider sells below the current price, it suggests that he or she considered that lower price to be fair. This makes us wonder what they think of the recent (higher) valuation. While insider selling is not a positive sign, we cannot be sure that this means that insiders think stocks are fully valued, so it is only a weak sign. Note that the biggest single sale was only 2.8% of Ian Malouf’s stake. Ian Malouf was the only individual insider for sale in the past year.
Fortunately, we note that in the past year, insiders paid AU $ 56,000 for 25.32,000 shares. But they sold 3.14 million shares for AU $ 8.5 million. Ian Malouf has sold 3.14 million shares in the past 12 months at an average price of AU $ 2.72. Below you can see a visual representation of insider trading (by businesses and individuals) over the past 12 months. If you want to know exactly who sold, for how much and when, just click on the graph below!
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Another way to test the alignment between a company’s executives and other shareholders is to look at how many shares they own. We generally like to see fairly high levels of insider ownership. Bingo Industries insiders own around A $ 722 million in stock (or 32% of the company). Most shareholders would be happy to see this type of insider ownership, as it suggests that management’s incentives are well aligned with those of other shareholders.
So what do Bingo Industries insider trading indicate?
It doesn’t really mean much that no insiders have traded Bingo Industries shares in the past quarter. While we are pleased with the high insider ownership of Bingo Industries, the same cannot be said for the sale of shares. If you are like me, you might want to ask yourself if this business will grow or shrink. Fortunately, you can check this out free report showing analysts’ forecasts for its future.
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For the purposes of this article, insiders are those persons who report their transactions to the relevant regulatory body. We currently account for open market transactions and private assignments, but not derivative transactions.
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