Director Dealings

What are Director Dealings?

Director dealings are transactions of shares that directors make in their own business. It’s a legal form of insider trading, with strict rules around disclosure.

Why are Director Dealings important?

A director buying shares in their own company can be a sign of confidence that the share price is likely to go higher, particularly if the sums involved are considerable. This is not always the case, though. Directors can use these disclosures to give the impression of confidence in order to generate interest in their company. You’ll need to decide for yourself.

Conversely, a director selling shares in their business is rarely seen as a vote of no confidence. After all, it doesn’t look great for a director to sell shares if they feel the share price has gone as high as it will go or if there is a bad piece of news around the corner. Selling shares is often done as a form of remuneration or bonus where a director has achieved their targets.  They get to buy shares at a discounted rate and then sell them at the current market rate. Look closely for the reasons associated with the sale before jumping to any conclusions.

How can I use Director Dealings?

Director dealings can provide a useful barometer for how the company fortunes are perceived internally. While director dealings should not be the single criterion to make an investment decision in a stock, they can prove to be a useful measure to reinforce your research, or provide you with some useful ideas.