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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 before you buy or sell Zip Co Limited (ASX:Z1P), you may well want to know whether insiders have been buying or selling.

What Is Insider Selling?

It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. 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 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.’

Check out our latest analysis for Zip Co

The Last 12 Months Of Insider Transactions At Zip Co

Over the last year, we can see that the biggest insider sale was by CEO, MD & Executive Director Larry Diamond for AU$7.0m worth of shares, at about AU$1.06 per share. That means that an insider was selling shares at slightly below the current price (AU$1.19). While their view may have changed since they sold, this isn’t a particularly bullish sign. We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price. We note that the biggest single sale was only 10.8% of Larry Diamond’s holding.

All up, insiders sold more shares in Zip Co than they bought, over the last year. The sellers received a price of around AU$1.06, on average. It’s not too encouraging to see that insiders have sold at below the current price. Of course, the sales could be motivated for a multitude of reasons, so we shouldn’t jump to conclusions. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Zip Co Insiders Are Selling The Stock

We’ve seen more insider selling than insider buying at Zip Co recently. In total, insiders sold AU$10m worth of shares in that time. Meanwhile Non-Executive Chairman Philip Crutchfield bought AU$95k worth. Because the selling vastly outweighs the buying, we’d say this is a somewhat bearish sign.

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. A high insider ownership often makes company leadership more mindful of shareholder interests. Zip Co insiders own about AU$114m worth of shares. That equates to 30% of the company. 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 Zip Co Tell Us?

The insider sales have outweighed the insider buying, at Zip Co, in the last three months. Despite some insider buying, the longer term picture doesn’t make us feel much more positive. It is good to see high insider ownership, but the insider selling leaves us cautious. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Zip Co.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.