They’re at it again: Alpha FX Group insiders dealing in shares

Over the last few months, some quiet controversy has bubbled up regarding the assertion from many inside sources that senior members of staff at AlphaFX Group PLC, one of the UK’s largest currency management solutions providers, which is publicly listed on the London Stock Exchange.

Today is no exception, however it is hard to fathom what the hysteria is about.

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.

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 Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year’.

Over the last twelve months, official figures shown by Yahoo Finance, demonstrating the ticker symbol of Alpha FX Group show that £1,092,000 worth of insider shares in Alpha FX Group PLC have been sold, and today information emerged as to which of those ‘in the know’ have been making the largest transactions relating to company stock.

However, some sources claim otherwise. One particular insider, James Stuart, is said to have made the biggest insider sale in the last 12 months. That single transaction was for UK£2.8m worth of shares at a price of UK£7.01 each.

That means that an insider was selling shares at slightly below the current price (UK£10.40). We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. Please do note, however, that sellers may have a variety of reasons for selling, so we don’t know for sure what they think of the stock price. This single sale was just 27% of James Stuart’s stake.

FinanceFeeds received communication from a spokesman relating to Mr Stuart’s position on this, and has confirmed that the original source of this information “hasn’t taken into account the context behind the movements.”

“In summary, James Stuart had ceased employment at Alpha FX at the time he is alleged to have sold £2.8m of shares.  The remaining share movements meanwhile represent one internal transfer between family members and were not disposed of. No insider dealing has therefore taken place” said the representative for AlphaFX.

In the last twelve months insiders purchased 52.94k shares for UK£360k. But they sold 625.00k shares for UK£4.4m. In total, Alpha FX Group insiders sold more than they bought over the last year. The chart below shows insider transactions (by companies and individuals) over the last year. The graph here shows the precise details of each insider transaction.

SimplyWallStreet, which has been following this closely, states that it has an interest in looking at how many insiders own shares in a company, to help inform the view of how aligned they are with insiders.

They say it’s a good sign if insiders own a significant number of shares in the company. Alpha FX Group insiders own 36% of the company, currently worth about UK£150m based on the recent share price.

Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

 

Looking at Alpha FX Group PLC’s stock price this week, it shot up 5.4% yesterday . The stock traded as high as GBX 1,298 ($17.07) and last traded at GBX 1,265 ($16.64), 17,825 shares changed hands during trading. An increase of 4% from the average session volume of 17,221 shares. The stock had previously closed at GBX 1,200 ($15.79)

Either the insider traders are interested in their own potential gains, or they know the best way to bulk up the company’s share prices to receive maximum director’s bonuses/dividends as well as profit from their own trading.

QED…