Directors' dealings

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7. Dealings in the context of recent share price

The recent share price of a company is a factor when considering the relevance of directors' dealings.

• If the share price has enjoyed a good run over the past few months and there is then significant selling by one or more directors this suggests profit taking by directors who think that the price has gone far enough, at least in the short term. That may be a sign for you to sell too.
• If several directors are buying when the share price has nose-dived over the last few months then this is usually a sign that they think the price has fallen too far and will bounce back, or they may be aware of action being taken to stem the current trend.

Again, these are general rules, and directors buying when the share price has enjoyed a good run could still indicate that the price has further to go.

Example

Merant in early 1999

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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