Insiders Made Right Decision To Sell As Walnut Capital Dips 13%

By selling HK$10m worth of Walnut Capital Limited (HKG:905) stock at an average sell price of HK$0.055 over the last year, insiders seemed to have made the most of their holdings. After the stock price dropped 13% last week, the company's market value declined by HK$63m, but insiders were able to mitigate their losses.

Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.

View our latest analysis for Walnut Capital

Walnut Capital Insider Transactions Over The Last Year

The CEO & Executive Director, Bun Man Mung, made the biggest insider sale in the last 12 months. That single transaction was for HK$6.6m worth of shares at a price of HK$0.058 each. That means that even when the share price was below the current price of HK$0.42, an insider wanted to cash in some shares. 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. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. It is worth noting that this sale was only 18% of Bun Man Mung's holding. The only individual insider seller over the last year was Bun Man Mung.

Bun Man Mung sold a total of 188.53m shares over the year at an average price of HK$0.055. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, 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 hidden gems this free list of small cap companies with recent insider purchasing, could be just the ticket.

Does Walnut Capital Boast High Insider Ownership?

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. Walnut Capital insiders own about HK$247m worth of shares (which is 56% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

So What Do The Walnut Capital Insider Transactions Indicate?

It doesn't really mean much that no insider has traded Walnut Capital shares in the last quarter. It's great to see high levels of insider ownership, but looking back over the last year, we don't gain confidence from the Walnut Capital insiders selling. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. For example, Walnut Capital has 4 warning signs (and 2 which are concerning) we think you should know about.

But note: Walnut Capital 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 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.