It takes conviction to keep buying shares in a company as the price falls. After falling nearly 28% this year, how much faith do investors still have in A2 Milk Company Ltd (ASX: A2M) shares?
Unfortunately, one cohort of investors that has not displayed considerable conviction in the infant formula company's shares is its insiders. These are A2 Milk's board members, leadership team, and other employees who you'd expect to know the health and potential of the business the best.
Skin in the game?
It can be comforting to see insiders buying shares when you are invested in a company and along for the ride. You want to feel as though management is right there with you, financially motivated to make the best decisions for the future of the business.
Following a bumpy past few years, one would hope company directors have been taking the opportunity to buy A2 Milk shares at these reduced prices, especially if they plan to drive more growth and greater earnings moving forward.
Surprisingly, only three on-market buys have been carried out by A2 Milk directors over the past six years. The last transaction occurred on 29 November 2022, with independent director Pip Greenwood buying 30,000 shares for $197,905.
One possible explanation could be the prevalence of option exercising and security conversions due to employee incentives. When an insider exercises their options, they can buy shares at a discount.
More recently, A2 Milk CEO and managing director David Bortolussi converted part of his incentives into 155,641 A2 Milk shares. The transaction provided $1.08 million worth of additional skin in the game for Bortolussi on 2 February 2023.
At the time of writing, the CEO holds NZ$1.5 million worth of shares in the A1 protein-free milk business.
Who has been buying A2 Milk shares?
The company's directors may not be going out of their way to scoop up A2 Milk shares. However, one Australian investment fund has been ploughing money into the once-lauded New Zealand-born milk maker.
According to filings, Perpetual Ltd (ASX: PPT) grabbed $151 million worth of A2 Milk shares on 7 June. This came shortly after the investment fund sold $138 million five days earlier.
Perpetual is A2 Milk's largest shareholder, holding NZ$233 million worth on its books. This equates to a 6.65% stake in the company. The next closer shareholder on the register is the multi-trillion-dollar asset manager, Vanguard Group.
