Shares of video game retailer GameStop Corp. (NYSE:GME) jumped as much as 14.3% in trading Monday after news broke that insiders bought a significant amount of shares. At 3 p.m. EDT shares were still up 11.1% on the day.
There were two big insider purchases. CEO George Sherman bought 96,735 shares last week and CFO Jim Bell acquired 4,500 shares. Sherman's acquisition cost about $500,000, which is significant considering the company's $350 million market cap right now.
Insider buying is often seen as a bullish sign by investors because insiders (especially the CEO and CFO) know exactly what's going on with a company day to day. The problem is, we can't know exactly what they're thinking in the moment and will have to wait at least until the next quarterly report to get a view of what's going on with the company.
I wouldn't buy a stock just based on insider buying alone and GameStop has a lot of questions to answer over the next few months. Stores are closed and the company is trying to transition to a more e-commerce focused business. Long-term, that could prove successful, but I'm leery of buying today without seeing just how well the company is performing in the absence of its traditional retail storefronts.