Over the past year, many Open Text Corporation (NASDAQ:OTEX) insiders sold a significant stake in the company which may have piqued investors' interest. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.

Check out our latest analysis for Open Text

Open Text Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the Vice Chairman, Mark Barrenechea, sold US$16m worth of shares at a price of US$41.30 per share. So what is clear is that an insider saw fit to sell at around the current price of US$37.60. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. Given that the sale took place at around current prices, it makes us a little cautious but is hardly a major concern.

Over the last year, we can see that insiders have bought 11.53k shares worth US$443k. But they sold 747.31k shares for US$30m. In total, Open Text insiders sold more than they bought over the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!

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Insiders At Open Text Have Sold Stock Recently

The last quarter saw substantial insider selling of Open Text shares. In total, insiders dumped US$16m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.

Insider Ownership Of Open Text

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Open Text insiders own about US$214m worth of shares (which is 2.1% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

What Might The Insider Transactions At Open Text Tell Us?

Insiders haven't bought Open Text stock in the last three months, but there was some selling. Zooming out, the longer term picture doesn't give us much comfort. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Be aware that Open Text is showing 5 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...

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For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions of direct interests only, but not derivative transactions or indirect interests.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.