Whenever corporate insiders in the UK buy or sell shares in their own companies, they are required to notify the UK Financial Conduct Authority (FCA), and the organization, of their transactions. Director/PDMR Shareholding announcements are news releases that relate to these director dealings. PDMR stands for ‘Person Discharging Managerial Responsibilities.’
In this guide, we look at the basics of Director/PDMR Shareholding announcements including how to read them. We also explain how these insider announcements can be used to generate investment ideas.
Director/PDMR Shareholding announcements explained
A Director/PDMR Shareholding announcement is a news release that publicly-listed companies in the UK are required to publish after an insider has bought or sold shares or other financial instruments in the company. The announcement lists the details of any recent insider transactions.
A PDMR of an issuer, and persons closely associated (PCAs) with them, are required to notify the FCA, and the issuer, of every transaction that has been conducted on their own account relating to the shares or debt instruments, derivatives, or other financial instruments linked to that issuer. This only applies if the total amount of transactions has reached €5,000 in the calendar year.
These notifications can be made by completing the PDMR form which can be accessed on the FCA’s website. PDMRs are required to provide these notifications no later than three business days after the date of the transaction.
What is the definition of a PDMR?
The definition of a PDMR as per the FCA’s Market Abuse Regulation (MAR) is a person who is:
- A member of the administrative, management, or supervisory body of the issuer; or
- A senior executive who is not a member of those bodies, who has regular access to inside information relating directly or indirectly to that entity and power to take managerial decisions affecting the future developments and business prospects of that entity.
How can investors use Director/PDMR announcements to their advantage?
Director/PDMR Shareholding announcements can help investors identify transactions that top corporate insiders such as CEOs, CFOs, and Chairmen have made in UK publicly-listed companies.
This is valuable because corporate insiders have a genuine information advantage over other investors and a number of academic studies have found a link between insider transaction activity and future stock returns. As such, Director/PDMR Shareholding announcements can potentially be used to generate investment ideas.
As a general rule, Director/PDMR Shareholding announcements that show substantial insider buying activity are a bullish signal. If corporate insiders are buying, it shows that they are confident about the future and expect the company’s share price to rise.
PDMR announcements that show that insiders have been selling stock are a little more difficult to interpret. This is because there are a number of reasons that insiders sell stock that have nothing to do with the company’s future prospects. For example, an insider may simply wish to diversify their investments. Announcements that show large insider sales should not be ignored, however, as in some situations, it can be an indication that insiders are offloading their stock in the expectation that the stock will soon fall.
Where can investors find director dealings / PDMR data?
There are a number of ways you can gain access to UK director dealings / PDMR data. The first way is to monitor the announcements of individual companies. Director dealings announcements are usually entitled ‘Director/PDMR Shareholding,’ however they may have other names including:
- Notification of Directors’ Interests
- Directors’ Dealings
- PDMR Dealing
- Director Share Dealings in Company
- PCA Dealings
- PDMR and PCA Notification
The second way is to search on the London Stock Exchange website. Here, you can use the ‘News Explorer’ function to find news in relation to director dealings in UK companies.
The third way is to monitor websites that provide director dealings feeds. These websites provide aggregated data, however, the data is generally in very basic form.
The fourth, and easiest way, to find Director/PDMR data is to subscribe to an insider transaction data provider such as 2iQ Research. 2iQ provides access to the most complete and accurate insider transactions data set in the industry, listing director dealings data for 60,000 stocks across more than 50 countries.
How to read a Director/PDMR announcement
Director/PDMR Shareholding announcements are easy to read.
Below is an example of a PDMR announcement issued by BT Group PLC (BT/A:LN) on 14 May 2020 and a breakdown of this report.
Source: London Stock Exchange
- Section 1 contains the name of the corporate insider (PDMR) that made the transaction. In this case, it was Philip Jansen.
- Section 2 details the position of the insider – Chief Executive.
- Section 3 contains the details of the issuer or company – BT Group PLC.
- Section 4 contains the details of the transaction. From this notification we can see that Jansen purchased 1,834,000 BT Group ordinary shares at a price of £1.096 per share. The date of the transaction was 13 May 2020.
Director/PDMR Shareholding summary
Director/PDMR Shareholding announcements relate to director dealings in UK publicly-listed companies. PDMR stands for ‘Person Discharging Managerial Responsibilities.’ Director/PDMR Shareholding announcements can potentially be used to generate investment ideas.
There are a number of ways to gain access to Director/PDMR data. The easiest way is through a data provider that provides access to an insider transaction database.