In the last year, many First Merchants Corporation (NASDAQ:FRME) insiders sold a substantial stake in the company which may have sparked shareholders' attention. When evaluating insider transactions, knowing whether insiders are buying versus if they selling is usually more beneficial, as the latter can be open to many interpretations. However, shareholders should take a deeper look if several insiders are selling stock over a specific time period.
While insider transactions are not the most important thing when it comes to long-term investing, we would consider it foolish to ignore insider transactions altogether.
View our latest analysis for First Merchants
First Merchants Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the Independent Chairman of the Board, Charles Schalliol, sold US$1.1m worth of shares at a price of US$44.72 per share. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. The silver lining is that this sell-down took place above the latest price (US$40.26). So it may not tell us anything about how insiders feel about the current share price.
Over the last year we saw more insider selling of First Merchants shares, than buying. 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!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insiders At First Merchants Have Sold Stock Recently
The last three months saw significant insider selling at First Merchants. In total, insiders dumped US$1.2m 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.
Does First Merchants Boast High 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. Insiders own 1.5% of First Merchants shares, worth about US$36m. 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 First Merchants Insiders?
Insiders sold First Merchants shares recently, but they didn't buy any. Zooming out, the longer term picture doesn't give us much comfort. Insiders own shares, but we're still pretty cautious, given the history of sales. We'd practice some caution before buying! So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. In terms of investment risks, we've identified 2 warning signs with First Merchants and understanding these should be part of your investment process.
But note: First Merchants may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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, but not derivative transactions.
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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.