Top-level corporate executives tend to have the most up-to-date information on their companies’ prospects. If these insiders are selling company stock, it can be a bearish development.
Here, we are going to highlight a large insider sale at Hochschild Mining PLC (HOC:LN). Hochschild Mining is a precious metals company that explores for, mines, processes, and sells gold and silver in the Americas. It’s listed on the London Stock Exchange and currently has a market capitalization of £962 million.
Hochschild Mining: insider selling
Regulatory filings show that on 3 December the Chairman of Hochschild Mining, Eduardo Hochschild, sold 61.665 million HOC shares at a price of £2 per share. This sale – which netted the insider approximately £123 million – reduced his holding by close to 24%.
This Chairman sale looks interesting to us for two main reasons. Firstly, Hochschild has been involved with the company since 1987 and has been in a leadership role since 1998. This means he is likely to know the business extremely well. After he last sold stock in March 2017, the share price declined significantly over the next 18 months.
Secondly, this is a substantial sale from the insider, which suggests he sees limited share upside in the near term.
Covid-19 continues to have an effect
Covid-19 has severely impacted Hochschild Mining’s production capabilities throughout a large part of 2020. For example, in November, the company was forced to halt operations at its San Jose operation in Argentina due to a rise in infections in the Santa Cruz province.
The company has confirmed recently that it is on track to meet its revised 2021 output target of 280,000-290,000 gold equivalent ounces, however, with Covid-19 lingering, and gold and silver prices declining, there is a risk that near-term results could be disappointing.
Putting this all together, we see the insider selling here as a bearish signal. It suggests that the Chairman is of the opinion that there is further downside in the share price to come.