12-month performance: +43% Insider activity: Bearish Insider selling pattern: Sales from CEO, CFO, and Company Secretary Recent news: Good trading update
If insiders are selling company stock, it can pay to approach the stock with caution. Insider sales can be a signal that the stock is overvalued or that the outlook for the company is deteriorating.
In this report, we are to highlight some substantial insider sales at GB Group PLC (GBG:LN). GB Group is a UK-based technology company that specializes in identity management. It is listed on the Alternative Investment Market (AIM) of the London Stock Exchange and currently has a market capitalization of £1.7 billion.
GB Group: insider selling
What’s caught our attention here is a series of recent insider sales. Our records show that on 22 October, three top-level insiders offloaded stock.
Those selling were:
CEO Chris Clark, who sold 140,000 shares at a price of £9.34 per share
CFO & COO David Wilson, who sold 100,000 shares at a price of £9.35 per share
Company Secretary John-Henri Constantin, who sold 4,062 shares at a price of £9.23 per share.
Source: 2iQ Research
Combined, these insiders sold about £2.3 million worth of stock.
This selling activity is significant because the CEO and CFO sales are substantial, both in nominal and relative terms. Clark’s sales, worth £1.3 million, reduced his holding from 338,450 shares to 198,450 shares, a decrease of 41%. Meanwhile, Wilson’s sales, worth roughly £935,000, reduced his holding from 221,030 shares to 121,030 shares, a decrease of 45%.
Share price surge
GB Group shares have had a good run this month. After starting the month near the 700p level, the stock rose to 982p on 22 October. A good trading update, in which the company advised that it is expecting a 26% rise in operating profit this year and that it will be resuming its dividend, was the reason the share price spiked. Insiders took advantage of the share price surge and offloaded stock while the share price was above 930p.
Is this selling activity a red flag? Probably not, given the good recent trading update. However, it does suggest that insiders see the stock as fully valued right now.