Benzinga | Dec 14, 2020 11:20AM EST

Insider Buys Amergent Hospitality's Stock



Shares of Amergent Hospitality Inc (OTC:AMHG) climbed by 5.6% from the previous closing price. CEO Pruitt Michael D filed a Form 4 with the SEC on Monday, December 14. The insider bought 4,000 shares at an average price of $0.45. After the transaction, the executive's stake in Amergent Hospitality Inc. moved to 20,429 shares.

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. Insiders who sell stock at new lows could be anticipating some capitulation moment. If the insider sells at new highs, it could point to the intention 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.