We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Party City Holdco Inc. (NYSE:PRTY).
Do Insider Transactions Matter?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
We don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
Party City Holdco Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Vice Chairman, James Harrison, for US$1.3m worth of shares, at about US$6.64 per share. That means that an insider was selling shares at slightly below the current price (US$7.77). As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was only 45% of James Harrison's holding. The only individual insider seller over the last year was James Harrison.
In the last twelve months insiders purchased 521.91k shares for US$1.2m. But they sold 555.00k shares for US$3.3m. James Harrison sold a total of 555.00k shares over the year at an average price of US$5.92. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!NYSE:PRTY Insider Trading Volume July 20th 2021
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insiders at Party City Holdco Have Sold Stock Recently
The last three months saw significant insider selling at Party City Holdco. Specifically, Vice Chairman James Harrison ditched US$1.3m worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.
Insider Ownership of Party City Holdco
For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. Party City Holdco insiders own about US$13m worth of shares. That equates to 1.5% of the company. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Does This Data Suggest About Party City Holdco Insiders?
An insider sold stock recently, but they haven't been buying. And our longer term analysis of insider transactions didn't bring confidence, either. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. So we'd only buy after careful consideration. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. For example - Party City Holdco has 3 warning signs we think you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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