Directors' dealings

Introduction| Course| Q&As | Recommended reading| Quiz | 12500000

6. Safety in numbers

Just as important as the size of the sale or purchase, is the number of directors buying or selling: Several directors dealing in unison is particularly significant.

While one director buying may be a sign of confidence, several board members buying, especially amongst the executive directors, can be seen as an overwhelming endorsement. When this happens, one usually expects a movement in the share price, even if it is just the market recognising the transaction.

Example

Great Universal Stores

Great Universal Stores in late 1999

However, while the significance of several directors buying or selling cannot be overlooked, one must also decide if the confidence of a particular board is worth acting on.

1. What are directors' dealings? 2. Distinction from insider dealing 3. Two premises and a fallacy 4. Size of transaction 5. Who knows best? 6. Safety in numbers 7. Dealings in the context of recent share price 8. The closed period 9. Follow the leader 10. Sales can sometimes be a good sign 11. Playing the percentages 12. Other factors 13. Conclusion

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