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 FSD Pharma Inc. (CNSX:HUGE).
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. 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. For example, a Colombia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.
FSD Pharma Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by Thomas Fairfull for CA$8.5m worth of shares, at about CA$0.64 per share. While the sale doesn’t make us feel confident, we do note it was conducted at a price well above the current share price, which is CA$0.27. So it may not shed much light on insider confidence at current levels.
Over the last year, we note insiders sold 14.49m shares worth CA$9.5m. All up, insiders sold more shares in FSD Pharma than they bought, over the last year. The average sell price was around CA$0.65. Insider selling doesn’t make us excited to buy. But the selling was at much higher prices than the current share price (CA$0.27), so it probably doesn’t tell us a lot about the value on offer today. You can see a visual depiction of insider transactions over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insiders at FSD Pharma Have Sold Stock Recently
The last quarter saw substantial insider selling of FSD Pharma shares. Specifically, insiders ditched CA$9.5m worth of shares in that time, and we didn’t record any purchases whatsoever. In light of this it’s hard to argue that all the directors think that the shares are a bargain.
Does FSD Pharma Boast High 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. A high insider ownership often makes company leadership more mindful of shareholder interests. It’s great to see that FSD Pharma insiders own 7.7% of the company, worth about CA$30m. 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 Does This Data Suggest About FSD Pharma Insiders?
Insiders sold stock recently, but they haven’t been buying. And even if we look to the last year, we didn’t see any purchases. Insider ownership isn’t particularly high, so this analysis makes us cautious about the company. We’re in no rush to buy! Along with insider transactions, I recommend checking if FSD Pharma is growing revenue. This free chart of historic revenue and earnings should make that easy.
But note: FSD Pharma 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.