We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 shareholders might well want to know whether insiders have been buying or selling shares in Virgin Galactic Holdings, Inc. (NYSE:SPCE).
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Columbia 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’.
The Last 12 Months Of Insider Transactions At Virgin Galactic Holdings
The Independent Director Craig Kreeger made the biggest insider purchase in the last 12 months. That single transaction was for US$195k worth of shares at a price of US$19.48 each. That means that an insider was happy to buy shares at above the current price of US$17.66. It’s very possible they regret the purchase, but it’s more likely they are bullish about the company. We always take careful note of the price insiders pay when purchasing shares. 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.
In the last twelve months Virgin Galactic Holdings insiders were buying shares, but not selling. Their average price was about US$15.89. Although they bought at below the recent share price, it is good to see that insiders are willing to invest in the company. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
Virgin Galactic Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insider Ownership of Virgin Galactic Holdings
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. Virgin Galactic Holdings insiders own 5.0% of the company, currently worth about US$205m based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
What Might The Insider Transactions At Virgin Galactic Holdings Tell Us?
There haven’t been any insider transactions in the last three months — that doesn’t mean much. However, our analysis of transactions over the last year is heartening. It would be great to see more insider buying, but overall it seems like Virgin Galactic Holdings insiders are reasonably well aligned (owning significant chunk of the company’s shares) and optimistic for the future. In addition to knowing about insider transactions going on, it’s beneficial to identify the risks facing Virgin Galactic Holdings. While conducting our analysis, we found that Virgin Galactic Holdings has 4 warning signs and it would be unwise to ignore them.
Of course Virgin Galactic Holdings 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.
This article by Simply Wall St is general in nature. 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.