A Form 4 filing filed with the SEC on Thursday, November 19 showed that Bagley Edward D bought 5,000 shares of ClearOne Inc (NASDAQ:CLRO) at $1.85 on Tuesday, Nov 17, bought 3,914 shares at $1.93 on Wednesday, Nov 18, and bought 5,000 shares at $1.95 on Thursday, Nov 19.The transaction moved the executive's stake in ClearOne Inc. to 8,271,043 shares. ClearOne was trading 0.1% higher from the previous closing price.
The Importance of Insider Transactions
Insider transactions shouldn't be used primarily to make an investing decision, however an insider transaction can be an important factor in the investing decision.
Insiders buying stock after a notable sell off can indicate an insider's long-term belief in the success of the company; insiders buying stock at new highs can be an indication the exec doesn't feel the stock is overvalued. Conversely, insiders who are selling stock at new lows can potentially indicate some kind of capitulation moment. Insiders selling at new highs can indicate that exec wants to "take some profit" and "lock in a gain."
Important Transaction Codes
Investors prefer focusing on transactions which take place in the open market, indicated in the Form 4 with codes P for purchase and S for sale. An open-market transaction means the insider went into the market of their own volition and made an active decision about the potential path for a company and its stock moving forward.
Transaction codes other than P or S are often viewed with less conviction as they are often not tied to a decision by the exec. As an example, transaction code C indicates the conversion of an option. Transaction code A indicates the insider may have been forced to sell shares in order to receive compensation the exec was promised upon being hired by a company.