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Why the a2 Milk Company Ltd (Australia) share price sunk lower today

In afternoon trade the a2 Milk Company Ltd (Australia) (ASX: A2M) share price is down by around 3% to $3.33.

This makes the fast-growing dairy company one of the worst performers on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).

What happened?

Whilst there was no material news out of the company today, one announcement that caught my eye this morning related to further insider selling.

According to the release, A2 Milk’s CEO Geoffrey Babidge has offloaded a further 600,000 shares.

This means that in the last 18 months Mr Babidge has halved his holding in the company to 5 million partly paid ordinary shares.

Once again he has reiterated that this sale is in order to achieve a more balanced portfolio over time, and nothing to do with the company’s performance.

Whilst I think this is more than reasonable, I can also fully understand why some investors may be spooked by such actions.

Especially considering how directors at rival Bellamy’s Australia Ltd (ASX: BAL) offloaded a significant amount of shares ahead of its fall from grace.

What now?

A2 Milk’s shareholders could take heart from the fact that in the past its shares have generally gained strongly in the weeks following Mr Babidge’s share sales.

While only time will tell what happens from here, I would suggest investors remain calm and continue to hold its shares for the long-term.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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