Although Rainbow Rare Earths Limited (LON:RBW) shareholders have enjoyed a great week with the stock up 11%, insiders who sold stock over the past year haven't fared as well. They could have sold their shares at much higher prices and gotten a better return on their investment if they had waited.
While insider transactions are not the most important thing when it comes to long-term investing, we would consider it foolish to ignore insider transactions altogether.
Rainbow Rare Earths Insider Transactions Over The Last Year
In fact, the recent sale by Chief Financial Officer Peter Andrew Gardner was not their only sale of Rainbow Rare Earths shares this year. They previously made an even bigger sale of -UK£60k worth of shares at a price of UK£0.18 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of UK£0.24. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was just 35% of Peter Andrew Gardner's stake.
Peter Andrew Gardner sold a total of 548.56k shares over the year at an average price of US$0.20. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
View our latest analysis for Rainbow Rare Earths
If you are like me, then you will not want to miss this free list of small cap stocks that are not only being bought by insiders but also have attractive valuations.
Have Rainbow Rare Earths Insiders Traded Recently?
In the last three months, insiders sold UK£48k. But that was only a smidgen more than the UK£48k worth of buying. The net selling is so small that it's hard to draw any conclusions from these recent transactions.
Insider Ownership
Many investors like to check how much of a company is owned by insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 24% of Rainbow Rare Earths shares, worth about UK£38m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
What Might The Insider Transactions At Rainbow Rare Earths Tell Us?
Our data shows a little more insider selling than buying in the last three months. But the difference isn't enough to have us worried. We're a little cautious about the insider selling at Rainbow Rare Earths. But we do like the fact that insiders own a fair chunk of the company. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Rainbow Rare Earths. Case in point: We've spotted 5 warning signs for Rainbow Rare Earths you should be aware of, and 2 of them can't be ignored.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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 of direct interests only, but not derivative transactions or indirect interests.
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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.