Possible Signal As Frontier Developments Insiders Sell UK£9.7m In Stock

Despite the fact that Frontier Developments plc (LON:FDEV) stock rose 27% last week, insiders who sold UK£9.7m worth of stock in the previous 12 months are likely to be better off. Selling at an average price of UK£14.28, which is higher than the current price might have been the right call as holding on to stock would have meant their investment would be worth less now than it was at the time of sale.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

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Frontier Developments Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the Founder, David Braben, sold UK£7.0m worth of shares at a price of UK£351 per share. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. The silver lining is that this sell-down took place above the latest price (UK£5.17). So it is hard to draw any strong conclusion from it. David Braben was the only individual insider to sell over the last year.

David Braben ditched 677.84k shares over the year. The average price per share was UK£14.28. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

See our latest analysis for Frontier Developments

I will like Frontier Developments better if I see some big insider buys. While we wait, check out this free list of undervalued and small cap stocks with considerable, recent, insider buying.

Insider Ownership

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It appears that Frontier Developments insiders own 36% of the company, worth about UK£63m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

So What Do The Frontier Developments Insider Transactions Indicate?

It doesn't really mean much that no insider has traded Frontier Developments shares in the last quarter. Still, the insider transactions at Frontier Developments in the last 12 months are not very heartening. The modest level of insider ownership is, at least, some comfort. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Our analysis shows 2 warning signs for Frontier Developments (1 shouldn't be ignored!) and we strongly recommend you look at these before investing.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.

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 of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.