We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. On the other hand, we’d be remiss not to mention that insider sales have been known to precede tough periods for a business. So shareholders might well want to know whether insiders have been buying or selling shares in Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI).
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. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.
The Last 12 Months Of Insider Transactions At Spectrum Pharmaceuticals
In the last twelve months, the biggest single sale by an insider was when the insider, Stuart Krassner, sold US$299k worth of shares at a price of US$8.00 per share. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. It’s of some comfort that this sale was conducted at a price well above the current share price, which is US$2.85. So it may not tell us anything about how insiders feel about the current share price. Stuart Krassner was the only individual insider to sell shares in the last twelve months.
You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. From our data, it seems that Spectrum Pharmaceuticals insiders own 2.0% of the company, worth about US$6.5m. We do generally prefer see higher levels of insider ownership.
So What Do The Spectrum Pharmaceuticals Insider Transactions Indicate?
The fact that there have been no Spectrum Pharmaceuticals insider transactions recently certainly doesn’t bother us. We don’t take much encouragement from the transactions by Spectrum Pharmaceuticals insiders. We also note that, as far as we can see, insider ownership is fairly low, compared to other companies. So these insider transactions can help us build a thesis about the stock, but it’s also worthwhile knowing the risks facing this company. While conducting our analysis, we found that Spectrum Pharmaceuticals has 3 warning signs and it would be unwise to ignore them.