The purchase of stock by a company's own executives has always drawn the attention of investors. There are a number of different reasons that one or more members of a company's management team may choose to purchase the company's stock, and there are associated limitations regarding when they are, or are not, allowed to do it. Correspondingly, every investor seems to have their own ideas about why such purchases may be significant.
Perhaps the main reason investors want to know about in-house stock purchases is the perceived possibility, even though there are obviously restrictions on dealing shares based upon insider information, that a company's executives may know something outsiders do not. These are the people, after all, who are running the company every day, who must have an intimate knowledge of its strengths and weaknesses, and who should have a vision of where the organization is headed. Although there are studies that suggest insider purchases may indeed signal an upward movement in share price, there are many variables to consider. Is the purchase being made by an outside director or an inside executive? Is it just one executive or many? Is the purchase mostly for PR reasons, or based upon a real confidence in the company's future? And just how long term is that confidence?
When Beacon Enterprise, a global provider of Information Technology infrastructure solutions, recently announced that their senior management and directors will be making voluntary open-market purchases of the company's common stock at various prices, and that the company will establish a formal Executive Stock Purchase Program, it carried some weight. The reason was that it involved a number of executives who had expressed a personal desire to engage in such purchases, following a required waiting period after the filing of Beacon's 10Q. The statement suggested that there was a general feeling that the company's share price was a bargain based upon its market value and growth prospects.
For additional information, visit the company's website at AskBeacon.com
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