We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Sound Energy plc (LON:SOU).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
We don’t think shareholders should simply follow insider transactions. 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.’
The Last 12 Months Of Insider Transactions At Sound Energy
In the last twelve months, the biggest single sale by an insider was when CEO & Executive Director James Parsons sold UK£409k worth of shares at a price of UK£0.41 per share. That is hardly a positive sign, even though it took place above the latest price (UK£0.14). So it is hard to draw any strong conclusion from it. The only individual insider seller over the last year was James Parsons.
You can see a visual depiction of insider transactions 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!
Does Sound Energy 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. We usually like to see fairly high levels of insider ownership. Sound Energy insiders own 0.3% of the company, currently worth about UK£355k based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
What Might The Insider Transactions At Sound Energy Tell Us?
The fact that there have been no Sound Energy insider transactions recently certainly doesn’t bother us. Our analysis of Sound Energy insider transactions leaves us unenthusiastic. And we’re not picking up on high enough insider ownership to give us any comfort.