Should Investors Follow Insiders When They Buy?
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Posted On: 08/11/2022 9:43:35 AM
Should Investors Follow Insiders When They Buy?
Reasons to Follow Insider Trading
The argument for shadowing insiders makes a lot of sense. Executives and directors have the most up-to-date information on their companies' prospects. Intimately acquainted with cyclical trends, order flow, supply and production bottlenecks, costs, and other key ingredients of business success, these insiders are way ahead of analysts and portfolio managers, not to mention individual investors. Insiders' decisions (legal or not) to trade in their own companies' stocks are certainly worth examining.
When company insiders start buying shares of the company, it may be a signal for outside investors to follow suit, but looking at which insiders are acting matters.
One of the greatest investors of all time, Peter Lynch, was noted as saying that "insiders might sell their shares for any number of reasons, but they buy them for only one reason: they think the price will rise."
Information of insider activity can be found for free on several financial websites.
Unlike some early-stage companies, where it can be difficult to parse the many ways in which founders and executives may benefit whether or not the company succeeds, RGC has taken a more transparent approach that is well-aligned with shareholders’ long-term interests.
• Chairman and CEO support. Since RGC’s incorporation in October 2014 up to the IPO, the Company has been fully funded by its Chairman and CEO, Mr. Yat-Gai Au.
◦ Upon the IPO, the Chairman’s loan of USD $3.25 million, was converted into ~342,000 common shares at the initial offering price of USD $9.50.
◦ Pledged to not draw salary and bonus of more than USD $1 until the Company reaches USD $1 billion market capitalization;
◦ Will not award share options for himself;
◦ Since the IPO, RGC’s Chairman and CEO has purchased over USD $5 million in common shares on the open market. Most recently, he purchased 49,010 shares (~ USD $1.1 million) between April 1 and May 16, 2022, bringing his ownership to 81% of outstanding shares (~10.5 million).
• Billionaire investor backing. Samuel Chen, a successful early Zoom Video Communications (NASDAQ:ZM) investor is one of the major backers of RGC. Last reported 13G filing shows he holds a 7.63% stake in the company.
• Stock option lock-up extended. All directors and employees who were previously granted stock options upon the Company’s IPO have agreed to a further lock-up undertaking for a period of six months after their stock options become vested. As their stock options are set to vest on July 16, 2022, their shares will remain locked up until January 16, 2023.
• Royalties. Under the agreement with their strategic partner and TCM practitioner, Mr. Sik-Kee Au, creator of the original TCM formulae that form the basis of RGC’s intellectual property, RGC will pay 3% of net revenue, which will in turn be donated to charitable institutions/trusts at the choice of the TCM Practitioner.
https://www.investopedia.com/articles/02/121002.asp
https://www.investopedia.com/articles/02/121002.asp
https://finance.yahoo.com/news/rgc-ceo-figura...00965.html
Reasons to Follow Insider Trading
The argument for shadowing insiders makes a lot of sense. Executives and directors have the most up-to-date information on their companies' prospects. Intimately acquainted with cyclical trends, order flow, supply and production bottlenecks, costs, and other key ingredients of business success, these insiders are way ahead of analysts and portfolio managers, not to mention individual investors. Insiders' decisions (legal or not) to trade in their own companies' stocks are certainly worth examining.
When company insiders start buying shares of the company, it may be a signal for outside investors to follow suit, but looking at which insiders are acting matters.
One of the greatest investors of all time, Peter Lynch, was noted as saying that "insiders might sell their shares for any number of reasons, but they buy them for only one reason: they think the price will rise."
Information of insider activity can be found for free on several financial websites.
Unlike some early-stage companies, where it can be difficult to parse the many ways in which founders and executives may benefit whether or not the company succeeds, RGC has taken a more transparent approach that is well-aligned with shareholders’ long-term interests.
• Chairman and CEO support. Since RGC’s incorporation in October 2014 up to the IPO, the Company has been fully funded by its Chairman and CEO, Mr. Yat-Gai Au.
◦ Upon the IPO, the Chairman’s loan of USD $3.25 million, was converted into ~342,000 common shares at the initial offering price of USD $9.50.
◦ Pledged to not draw salary and bonus of more than USD $1 until the Company reaches USD $1 billion market capitalization;
◦ Will not award share options for himself;
◦ Since the IPO, RGC’s Chairman and CEO has purchased over USD $5 million in common shares on the open market. Most recently, he purchased 49,010 shares (~ USD $1.1 million) between April 1 and May 16, 2022, bringing his ownership to 81% of outstanding shares (~10.5 million).
• Billionaire investor backing. Samuel Chen, a successful early Zoom Video Communications (NASDAQ:ZM) investor is one of the major backers of RGC. Last reported 13G filing shows he holds a 7.63% stake in the company.
• Stock option lock-up extended. All directors and employees who were previously granted stock options upon the Company’s IPO have agreed to a further lock-up undertaking for a period of six months after their stock options become vested. As their stock options are set to vest on July 16, 2022, their shares will remain locked up until January 16, 2023.
• Royalties. Under the agreement with their strategic partner and TCM practitioner, Mr. Sik-Kee Au, creator of the original TCM formulae that form the basis of RGC’s intellectual property, RGC will pay 3% of net revenue, which will in turn be donated to charitable institutions/trusts at the choice of the TCM Practitioner.
https://www.investopedia.com/articles/02/121002.asp
https://www.investopedia.com/articles/02/121002.asp
https://finance.yahoo.com/news/rgc-ceo-figura...00965.html
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