Directors Dealings
Share dealings by directors in their own company can indicate what they think the future prospects of the company are.
Generally a director who buys shares obviously sees the purchase as a good investment, which would suggest the possibility of a price increase. For a sale of shares, the opposite is true. This is particularly so if the amounts involved are significant, the deal is made by the chief executive or finance director, or there are several directors dealings within a short space of time.
However, there are other valid reasons for the deals that do not reflect the company's performance. For example a newly appointed director might be expected to buy shares. Also a director can reduce their tax liability by selling shares on an annual basis and taking advantage of capital gains tax allowances.
Directors cannot deal in the shares up to two months after any results have been announced. Directors can also not deal when they are in possession of information that would inpact on the share price. The latter point could be difficult to validate, as a director will always have a level of knowledge about the company that is not readily available in the market.
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