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Insiders who acquired CA$2.3m worth of Skychain Technologies Inc.'s (CVE:SCT) stock at an average price of CA$0.44 in the past 12 months may be dismayed by the recent 23% price decline. Insiders invest with the hopes of seeing their money grow in value over time. However, as a result of recent losses, their initial investment is now only worth CA$949k, which is not what they expected.
Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.
The Last 12 Months Of Insider Transactions At Skychain Technologies
The CEO & Chairman of the Board Weichong Du made the biggest insider purchase in the last 12 months. That single transaction was for CA$2.0m worth of shares at a price of CA$0.42 each. That means that an insider was happy to buy shares at above the current price of CA$0.18. It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
While Skychain Technologies insiders bought shares during the last year, they didn't sell. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Skychain Technologies is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Skychain Technologies Insiders Bought Stock Recently
Over the last three months, we've seen significant insider buying at Skychain Technologies. CEO & Chairman of the Board Weichong Du spent CA$2.0m on stock, and there wasn't any selling. That shows some optimism about the company's future.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Skychain Technologies insiders own about CA$1.2m worth of shares. That equates to 21% of the company. 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 Skychain Technologies Tell Us?
It is good to see the recent insider purchase. And an analysis of the transactions over the last year also gives us confidence. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. When combined with notable insider ownership, these factors suggest Skychain Technologies insiders are well aligned, and that they may think the share price is too low. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. For example, Skychain Technologies has 5 warning signs (and 4 which are a bit concerning) we think you should know about.
Of course Skychain Technologies 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. 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.