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
In this example nine members of the board including the Chairman, Joint Deputy Chairmen, Chief Executive and Finance Director all bought a significant number of shares in the company on the 3rd of December 1999. In the next few days, the share price saw a significant rise before falling back slightly.
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.
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