Company insiders such as corporate executives and directors tend to have the most up-to-date information on their companies’ future prospects. If they’re buying stock, it’s often a bullish signal that investors should take note of.
Here, we are going to highlight a large director purchase at GlaxoSmithKline PLC (GSK:LN). GlaxoSmithKline engages in the creation, discovery, development, manufacture, and marketing of pharmaceutical products, vaccines, over-the-counter medicines, and health-related consumer products, globally. It’s listed on the London Stock Exchange and currently has a market capitalization of £68.6 billion.
GlaxoSmithKline PLC: Insider buying
Regulatory filings show that on 30 December, Senior Independent Non-Executive Director of GlaxoSmithKline, Manvinder Banga, purchased 36,600 GSK shares at a price of £13.76 per share. This purchase – which cost the insider approximately £500,000 – boosted his holding by 185%.
This Senior Director purchase looks interesting for a couple of reasons. Firstly, this is a substantial purchase from the insider, which is encouraging to see.
Secondly, Banga spent 33 years at Unilever before joining GlaxoSmithKline. This means he is likely to have a great deal of industry knowledge. He has been a Director at GlaxoSmithKline for over five years now too and his experience in pharmaceuticals is extensive.
Upcoming company split
GlaxoSmithKline shares are currently down about 22% over the last twelve months. Its financial performance has been impacted by Covid-19, with its vaccines business the hardest hit, although there was a recovery in vaccination rates in Q3. The company does still expect to hit the lower end of its full year 2020 adjusted EPS guidance, however.
GSK has been working towards splitting up into two new businesses, Biopharma and Consumer Health. Investors have been nervous during this transition phase due to the £2.4 billion cost of the spinoff and this is another reason that a stock that would normally be seen as defensive, has been weak over the last 12 months. Once the split occurs, it is expected that there will be a more efficient capital structure, which will drive higher growth, creating value for shareholders. Its recent collaboration with Adrestia Therapeutics shows that the company continues to pursue opportunities during the transition period.
Given that the split is expected to occur in the near future, we see the insider buying here as a bullish signal. It suggests that the insider sees value in the share price at current levels.