When Directors sell large chunks of shares, it is often perceived as a negative and a red flag warning sign for investors to follow suit.
In reality though, such sales cannot and should not be seen as a complete negative, as there are many reasons for Directors to reduce, not least when Institutions wish to acquire a stake, but cannot buy in any size or quantity.
Such appears to be the case for me at G4M, where following hot on the heels of the recently announced excellent results, CEO and founder Andrew Wass sold 810k shares being accompanied by three other Directors who each sold a far more modest 30k each.
The sales went through at £7.30p a share with Standard Life emerging as a buyer and which now sees it sitting on an 8% plus holding. Wass still retains a significant stake and on a personal note as a holder of the shares too, I don’t have an issue with his sale which is deemed as a secondary placing to satisfy the Institutional demand.
It isn’t the first time I have experienced this with a holding of mine, a classic prior case being when David Braben at Frontier Developments sold a large chunk of stock in a similar move. It works well for both parties and I take comfort in the fact that Standard Life was happy to pay £7.30p per share, clearly expecting significant upside from this point on.
In the case of FDEV, there had been a couple of large sales in recent years to satisfy such demand the most recent being the selling of 1.2m shares at £12.00 each by Braben’s wife.
Although the initial result of such sales often sees the share price dip with some private investors taking a cue, the subsequent performance more often the not sees the shares go on to achieve new highs.
In the case of FDEV the shares are today trading at £24.00 but have been up to £28.00, which has resulted in excellent returns for the buyer/s who took the lines of stock.
G4M has also seen its shares ease back on the news release and look to me not only worth holding on to my shares, but quite possibly worth adding a few more at a current £7.20p to buy.
The outlook remains strong, the business is in a good place and the growth potential remains positive, particularly across Europe where there is plenty to aim for.
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