As I mentioned here yesterday, insider selling is often regarded as a bearish indicator.
That's because if insiders believed that their shares were undervalued and destined to rise, they wouldn't part ways with them.
So, should owners of Pro Medicus Limited (ASX: PME) shares be concerned that their founders have just sold down their holdings?
Image source: Getty Images
What's happening?
According to an announcement, the ASX 200 stock's co-founders, Dr Sam Hupert and Anthony Hall, have each sold 1 million Pro Medicus shares during the current trading window.
Dr Hupert and Hall received an average of $88.02 per share, which equates to a total consideration of approximately $88 million each or $176 million combined.
The good news for shareholders is that demand for these shares was evidently very strong because the sale was undertaken at market price and represents only a 1.5% discount to the ASX 200 stock's record high.
As a comparison, the beleaguered tech stock Appen Ltd (ASX: APX) is currently attempting to raise $30 million from investors at a whopping 42.1% discount to its last close price.
Why are they selling this ASX 200 stock?
The company explained that the sale was made after the founders were approached by an individual fund. It said:
The Pro Medicus Board has been advised that co-founders Dr Sam Hupert and Mr Anthony Hall have sold 1 million shares each in the current trading window representing less than 4% of their individual holdings. The sale was in response to a strong approach from an individual fund and was done before market at the previous day's closing price (0% discount).
Should you be concerned?
While insider selling doesn't usually go down well with the market, it is important to put things into perspective.
Firstly, the company notes that the two founders remain "actively engaged in the company as executives and board members and are committed to its future."
Furthermore, "they remain the two key stake holders in the company with their combined holding post this recent sale of 48%." Clearly their interests remain firmly aligned with shareholders.
It is also worth highlighting that both founders have "re-affirmed that they do not intend to sell any further shares in PME in the foreseeable future."
This ASX 200 stock is up more than 50% over the last 12 months.
