Two non execs have decided enough’s enough, and ‘caught the falling knife’ by buying shares in Xstrata (XTA, 1310p).

Ian Strachan on October 2nd bought 5700 shares at GBP 17.19, investing GBP 97k and increasing his holding by over 60%. His colleague Claude Lamoureux on October 9th bought 4000 shares at GBP 13.78, investing GBP 55k. I don’t think he held any shares prior to this purchase.

If we look back to earlier this year, a number of executive directors including Trevor Reid (CFO), Santiago Zalmdumide (Executive Director), and Michael Davis (CEO) all exercised options and sold all their shares at between 3470p and 4342p (source: Company website, Digitallook, London Stock Exchange)_ Usual behaviour by directors is to sell a number of shares sufficient to pay the tax on the exercised share options, usually 40%. I’m not sure what the tax liability would be for these directors.

A sale of all the shares exercised indicates to me that they thought the shares were fully valued. How right they were. The share price of Xstrata fell from a high of 4420p in May to 1223p last week. 

Are the purchases by the two non execs of significance? Yes, they are significant in $$ terms, in terms of increase in shareholdings, and there are two directors acting.

Value of signal: Positive- Directors buying shares

Strength of signal: Medium