A question I frequently get from readers of our Insider Weekends series of articles is whether the insider purchases we are reporting are open market purchases. They are often concerned that the purchases might be insiders exercising options that were granted to them by the company or restricted stock units (RSUs) that have vested. Obviously the signal you receive from an insider exercising options is different from an insider putting their own money on the line to buy stock. In most cases, the insider probably already has significant exposure to the company through their employment, existing ownership of the stock and options/RSUs that are yet to vest. So why do insiders buy?
Insiders buy stock through open market purchases because,