Identically Priced Insider Transactions


One of the most important indicators to consider when analyzing insider trading is consensus of action. While frequently an open market purchase by an insider is a vote of confidence in that company’s future, it is also important to understand what other company insiders are doing. Seeing multiple insiders buy shares is clearly a more consistent message than a mixed signal we occasionally observe with simultaneous buying and selling by different insiders. Also, when you see a single insider make a purchase, a natural question is why don’t others come to the same positive assessment of the company outlook and join the buying.

However, there is one case when buying by multiple insiders might be misleading and it is when all of them are buying shares at exactly the same price. It is highly unlikely, even if the insiders happen to use the same broker, that they would be able to all get shares on the open market at exactly the same price. Most likely they are buying as a result of an IPO or some other internal share purchase plan, which allows them to buy at a pre-arranged price. While the price might fall within the market range, the underlying reason for buying may not be a good indicator of the insiders’ positive view on the company.

Every time a new transaction gets reported, Form4Oracle analyses all of the recent transactions in that company along with the new one in real-time and marks such transactions with the “Identical price” indicator to make it easier for you to spot them.

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2 Comments

  1. paul
    Posted March 16, 2010 at 5:48 pm | Permalink

    There are some good insights in the above post that are are applicable not just in US markets, but also overseas.

    Insider Purchases and Sales are published in most open economies, if one would only care to search for such information.

    • Mark Gaffney
      Posted March 30, 2010 at 6:00 pm | Permalink

      Hi Paul, Where might I pursue information regarding insider trading in overseas markets?
      Thanks,
      Mark

2 Trackbacks

  1. […] Note, however, that all the purchases have been done at the same price. […]

  2. […] however, that all the purchases have been done at the same price. Republic First Bancorp Inc. (FRBK)$1.49M, Form4Oracle Insider Sentiment Rating – Strong […]

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