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Did Meridian Energy Limited (NZSE:MEL) Insiders Buy Up More Shares?

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 Meridian Energy Limited (NZSE:MEL).

Do Insider Transactions Matter?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.

Insider transactions are not the most important thing when it comes to long-term investing. 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'.

See our latest analysis for Meridian Energy

The Last 12 Months Of Insider Transactions At Meridian Energy

In the last twelve months, the biggest single purchase by an insider was when Independent Director Mark Cairns bought NZ$146k worth of shares at a price of NZ$4.17 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being NZ$4.13). It's very possible they regret the purchase, but it's more likely they are bullish about the company. We always take careful note of the price insiders pay when purchasing shares. It is encouraging to see an insider paid above the current price for shares, as it suggests they saw value, even at higher levels. Mark Cairns was the only individual insider to buy over the year.

The chart below shows insider transactions (by individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

NZSE:MEL Recent Insider Trading March 27th 2020
NZSE:MEL Recent Insider Trading March 27th 2020

Meridian Energy is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Insider Ownership of Meridian Energy

For a common shareholder, it is worth checking how many shares are held by company 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 Meridian Energy insiders own 0.2% of the company, worth about NZ$22m. 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 Does This Data Suggest About Meridian Energy Insiders?

The fact that there have been no Meridian Energy insider transactions recently certainly doesn't bother us. On a brighter note, the transactions over the last year are encouraging. Insiders own shares in Meridian Energy and we see no evidence to suggest they are worried about the future. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. Case in point: We've spotted 3 warning signs for Meridian Energy you should be aware of, and 2 of them are concerning.

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, but not derivative transactions.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.