Some East West Bancorp, Inc. (NASDAQ:EWBC) shareholders may be a little concerned to see that the Chairman, Dominic Ng, recently sold a substantial US$4.6m worth of stock at a price of US$132 per share. However, it's crucial to note that they remain very much invested in the stock and that sale only reduced their holding by 4.3%.
The Last 12 Months Of Insider Transactions At East West Bancorp
In fact, the recent sale by Chairman Dominic Ng was not their only sale of East West Bancorp shares this year. They previously made an even bigger sale of -US$7.5m worth of shares at a price of US$125 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$131. 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. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. This single sale was just 6.9% of Dominic Ng's stake.
Insiders in East West Bancorp didn't buy any shares in the last year. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Check out our latest analysis for East West Bancorp
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Does East West Bancorp 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. It's great to see that East West Bancorp insiders own 0.9% of the company, worth about US$153m. 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 East West Bancorp Insiders?
Insiders sold East West Bancorp shares recently, but they didn't buy any. And there weren't any purchases to give us comfort, over the last year. But it is good to see that East West Bancorp is growing earnings. It is good to see high insider ownership, but the insider selling leaves us cautious. While it's good to be aware of what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. In terms of investment risks, we've identified 1 warning sign with East West Bancorp and understanding this should be part of your investment process.
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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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