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Should You Take Comfort From Insider Transactions At International Lithium Corp. (CVE:ILC)?

Simply Wall St
·4 mins read

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 before you buy or sell International Lithium Corp. (CVE:ILC), you may well want to know whether insiders have been buying or selling.

What Is Insider Selling?

It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. 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 International Lithium

International Lithium Insider Transactions Over The Last Year

In the last twelve months, the biggest single purchase by an insider was when Chairman & CEO John Wisbey bought CA$95k worth of shares at a price of CA$0.06 per share. That means that an insider was happy to buy shares at above the current price of CA$0.05. Their view may have changed since then, but at least it shows they felt optimistic at the time. In our view, the price an insider pays for shares is very important. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels. Notably John Wisbey was also the biggest seller.

Over the last year, we can see that insiders have bought 7.58m shares worth CA$360k. On the other hand they divested 6246000 shares, for CA$309k. In total, International Lithium insiders bought more than they sold over the last year. They paid about CA$0.047 on average. It's great to see insiders putting their own cash into the company's stock, albeit at below the recent share price. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!

TSXV:ILC Recent Insider Trading May 1st 2020
TSXV:ILC Recent Insider Trading May 1st 2020

There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).

Does International Lithium 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. We usually like to see fairly high levels of insider ownership. International Lithium insiders own 43% of the company, currently worth about CA$2.8m based on the recent share price. 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 Does This Data Suggest About International Lithium Insiders?

It doesn't really mean much that no insider has traded International Lithium shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. It would be great to see more insider buying, but overall it seems like International Lithium insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the future. 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. Be aware that International Lithium is showing 4 warning signs in our investment analysis, and 1 of those is a bit unpleasant...

But note: International Lithium 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.