If a CEO is spending millions on company stock, investors should take note. These insiders tend to be way ahead of analysts and portfolio managers when it comes to the performance of their companies and their stock purchases can provide valuable trading signals.
In this report, we are going to highlight CEO buying at Vestum AB (WESC:SS). Vestum is a Swedish investment company that is focused on the construction and infrastructure sectors. Its aim is to grow continuously through the acquisition of well-managed and profitable companies and work together with ambitious entrepreneurs and company management teams in order to develop the businesses and drive profitable growth. The company is listed on the OMX Nordic Exchange Stockholm and currently has a market capitalization of SEK 10.6 billion.
Vestum AB: Insider Buying
Our insider transaction data shows that between October 21 and October 28, two insiders at Vestum AB have bought stock.
The insider who has purchased the most shares during this period is CEO and Founder Conny Ryk, who acquired 206,681 shares at a price of between SEK 125 and SEK129.9 per share. In total, Ryk has spent around SEK 27.3 million on Vestum units. Another smaller trade was made during the same period by Director, Anders Rosenqvist of 4,000 shares worth roughly SEK 500,000. Combined, these trades cost the insiders around SEK 27.8 million (approx. USD $3.26 million).
Private Equity Background
This trading activity from Mr. Ryk is worth highlighting due to the fact he has made some well-timed purchases in the past. In June and July, for example, the insider picked up around 350,000 shares when the stock was trading under SEK 50. Since then, it has risen to around SEK 140.
It’s worth noting that Mr. Ryk has a private equity background. Previously, he has participated in over 30 M&A transactions. Given his background, he is likely to have a good understanding of his firm’s true value.
Growth Targets Raised
After raising its growth targets in June, Vestum raised its growth targets again in July.
It now expects to achieve an adjusted EBITA of at least SEK 3 billion by the end of 2025, driven by acquisitions in combination with organic growth. The previous growth target was to achieve pro forma sales of at least SEK 2 billion and pro forma adjusted EBITA of at least SEK 200 million through acquisitions annually.
The new growth targets are the result of a higher-than-estimated acquisition rate, an accelerated establishment of Vestum outside Sweden, and an improved balance sheet.
Since July, the company has successfully issued an unsecured bond loan of SEK 1.5 billion to Nordic institutional investors. The issue proceeds will be used to repay existing debt and strengthen the fund for future acquisitions and corporate investments.
“By taking the step into the bond market, we diversify our funding sources and create even better conditions for acting on interesting business opportunities and reaching our goal of an EBITA of at least SEK 3 billion by the end of 2025," commented Mr. Ryk.
In light of these developments, we see the insider buying as a bullish indicator.