Allaying fears over directors' large share purchases

Question: Brait non-executives had purchased close to R55 million in company shares since December 2024 (as at 6 February).

- Gareth Collier

Is this normal, and are there any concerns when a director makes large purchases over a short period?

The answer: director dealings, particularly significant instances where directors and key executives deploy their personal capital to acquire company shares, are considered by many to offer a window into the insiders' conviction regarding the company's future trajectory and intrinsic value.

Studies have repeatedly demonstrated that company insiders, on average, outperform other holders of their shares, suggesting they may possess an informational advantage.

This outperformance has even been noted in influential academic work that challenges the idea of efficient markets.

However, while significant director buying is frequently heralded as a bullish sign, suggesting that those with the deepest understanding of the company's operations believe it to be undervalued and poised for growth, a more comprehensive analysis requires investors to consider a broader spectrum of potential motivations and risks associated with these actions.

So, what should investors make of these significant director purchases?