Quite a few First Merchants Corporation (NASDAQ:FRME) insiders sold their shares over the past year, which may be a cause for concern. 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, shareholders should take a deeper look if several insiders are selling stock over a specific time period.

Although we don't think shareholders should simply follow insider transactions, we do think it is perfectly logical to keep tabs on what insiders are doing.

The Last 12 Months Of Insider Transactions At First Merchants

Over the last year, we can see that the biggest insider sale was by the Advisor & Vice Chair, Michael Rechin, for US$371k worth of shares, at about US$37.05 per share. So we know that an insider sold shares at around the present share price of US$34.31. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. We note that this sale took place at around the current price, so it isn't a major concern, though it's hardly a good sign.

Over the last year, we can see that insiders have bought 1.87k shares worth US$66k. On the other hand they divested 23.10k shares, for US$804k. Over the last year we saw more insider selling of First Merchants shares, than buying. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

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First Merchants Insiders Are Selling The Stock

We've seen more insider selling than insider buying at First Merchants recently. In that time, Senior VP & Chief Information Officer Stephan Fluhler dumped US$106k worth of shares. Meanwhile President Michael Stewart bought US$1.1k worth. Since the selling really does outweigh the buying, we'd say that these transactions may suggest that some insiders feel the shares are not cheap.

Insider Ownership

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. It appears that First Merchants insiders own 1.4% of the company, worth about US$29m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

So What Does This Data Suggest About First Merchants Insiders?

Unfortunately, there has been more insider selling of First Merchants stock, than buying, in the last three months. And our longer term analysis of insider transactions didn't bring confidence, either. While insiders do own shares, they don't own a heap, and they have been selling. We'd practice some caution before buying! So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. While conducting our analysis, we found that First Merchants has 1 warning sign and it would be unwise to ignore this.

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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.