As REE Automotive Ltd.'s market cap (NASDAQ:REE) drops to US$353m, insiders might be questioning their decision to buy earlier this year

The recent 11% drop in REE Automotive Ltd.'s (NASDAQ:REE) stock could come as a blow to insiders who purchased US$2.0m worth of stock at an average buy price of US$5.84 over the past 12 months. Insiders invest with the hopes of seeing their money grow in value over time. However, as a result of recent losses, their initial investment is now only worth US$512k, which is not what they expected.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

View our latest analysis for REE Automotive

REE Automotive Insider Transactions Over The Last Year

The Independent Director Hans Thomas made the biggest insider purchase in the last 12 months. That single transaction was for US$1.3m worth of shares at a price of US$5.81 each. That means that even when the share price was higher than US$1.48 (the recent price), an insider wanted to purchase shares. It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.

In the last twelve months REE Automotive insiders were buying shares, but not selling. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).

Does REE Automotive Boast High Insider Ownership?

Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. REE Automotive insiders own about US$79m worth of shares. That equates to 22% of the company. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.

What Might The Insider Transactions At REE Automotive Tell Us?

It doesn't really mean much that no insider has traded REE Automotive shares in the last quarter. But insiders have shown more of an appetite for the stock, over the last year. Insiders do have a stake in REE Automotive and their transactions don't cause us concern. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Case in point: We've spotted 3 warning signs for REE Automotive you should be aware of, and 1 of these is a bit concerning.

Of course REE Automotive may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

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, but not derivative transactions.

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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.