I’ve seen some columns on directors buying and selling shares in their own companies, could Eureka Report explain how significant such action is for a company? I’m interested in knowing more about this and what we can interpret from a director buying or selling shares.
Editor’s response: Thanks for your letter. At the bottom of Collected Wisdom each week, we include a small section on some recent director trades that I think you would find it of interest.
By looking at who’s buying and selling company shares, investors can sometimes get an idea as to the outlook and perhaps the director’s confidence in the company. If a director or multiple directors increase their stake(s), it’s generally seen as a vote of confidence. Some investors use that as part of their analysis when considering buying / selling shares. A director selling down a stake can be viewed negatively, especially if it’s a large sale, but it could also be for reasons such as selling to meet tax obligations or a pressing need for cash.