We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Synthetic Biologics, Inc. (NYSEMKT:SYN).

What Is Insider Buying?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.

We don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.

View our latest analysis for Synthetic Biologics

The Last 12 Months Of Insider Transactions At Synthetic Biologics

Over the last year, we can see that the biggest insider purchase was by insider David Lazar for US$723k worth of shares, at about US$0.38 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of US$0.83. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.

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!

Synthetic Biologics is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Does Synthetic Biologics Boast High Insider Ownership?

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. We usually like to see fairly high levels of insider ownership. From looking at our data, insiders own US$1.7m worth of Synthetic Biologics stock, about 3.2% of the company. We prefer to see high levels of insider ownership.

So What Do The Synthetic Biologics Insider Transactions Indicate?

It is good to see the recent insider purchase. We also take confidence from the longer term picture of insider transactions. But we don't feel the same about the fact the company is making losses. We would certainly prefer see higher levels of insider ownership but analysis of the insider transactions suggests that Synthetic Biologics insiders are expecting a bright future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Our analysis shows 6 warning signs for Synthetic Biologics (3 are significant!) and we strongly recommend you look at them before investing.