Over the past year, many Reddit, Inc. (NYSE:RDDT) insiders sold a significant stake in the company which may have piqued investors' interest. When evaluating insider transactions, knowing whether insiders are buying is usually more beneficial than knowing whether they are selling, as the latter can be open to many interpretations. However, if numerous insiders are selling, shareholders should investigate more.

While insider transactions are not the most important thing when it comes to long-term investing, we would consider it foolish to ignore insider transactions altogether.

View our latest analysis for Reddit

The Last 12 Months Of Insider Transactions At Reddit

In the last twelve months, the biggest single sale by an insider was when the Chief Operating Officer, Jennifer Wong, sold US$17m worth of shares at a price of US$32.30 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$202. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. It is worth noting that this sale was only 23% of Jennifer Wong's holding.

In the last twelve months insiders purchased 13.00k shares for US$442k. But they sold 1.55m shares for US$59m. In total, Reddit insiders sold more than they bought over the last year. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

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Reddit Insiders Are Selling The Stock

The last quarter saw substantial insider selling of Reddit shares. In total, insiders sold US$4.1m worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.

Insider Ownership

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. We usually like to see fairly high levels of insider ownership. Reddit insiders own about US$1.5b worth of shares (which is 4.5% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Does This Data Suggest About Reddit Insiders?

Insiders haven't bought Reddit stock in the last three months, but there was some selling. And our longer term analysis of insider transactions didn't bring confidence, either. It is good to see high insider ownership, but the insider selling leaves us cautious. While it's good to be aware of what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. To assist with this, we've discovered 2 warning signs that you should run your eye over to get a better picture of Reddit.

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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.

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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.