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Why the Kogan.com Ltd (ASX:KGN) share price plunged 10% today

Source: Kogan presentation

One of the worst performers on the Australian share market this morning has been the Kogan.com Ltd (ASX: KGN) share price.

In early trade the e-commerce company’s shares were down as much as 10% to $7.02. They have since recovered much of this decline and are down just 3% at the time of writing.

Why are Kogan.com shares sinking lower?

This morning the company released a brief announcement regarding the sale of shares by founder and chief executive officer Ruslan Kogan and chief financial officer David Shafer.

As many readers will be aware, the company has been in the news recently after reports emerged claiming that Canaccord Genuity, Macquarie Group Ltd (ASX: MQG) and UBS were in the market looking to sell upwards of 10% of the company’s shares on behalf of Mr Kogan and Mr Shafer.

The company responded to the reports by advising that the two parties “did not receive a bid that was acceptable to them and, as such, no transactions have occurred.”

That has all changed today, though, with both Mr Kogan and Mr Shafer offloading shares this morning.

According to the release, Mr Kogan and Mr Shafer received an unsolicited bid for 6 million shares this morning. The two executives have “reluctantly accepted the bid due to personal financial commitments.”

The company went on to advise that no further share sales by the two parties will occur prior to September 2018 and that both “Mr Kogan and Mr Shafer remain fully committed to the business and continue to have the vast majority of their personal wealth invested in Kogan.com.”

Details are limited at this point and it is unclear what price was paid and whether this is the sale of a total of 6 million shares or 6 million shares each.

Should you buy the dip?

While insider selling rarely goes down well with investors, I think on this occasion it is worth overlooking it due to the significant amount of personal wealth the directors have tied up in the company. As far as I am concerned, both have interests firmly aligned with shareholders.

As a result, I would consider buying shares with a long-term view on this weakness.

The shares of Blackmores Limited (ASX: BKL) have also dropped lower today after a spot of insider selling. And like Kogan, I think this could be considered a buying opportunity.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores Limited. The Motley Fool Australia has recommended Kogan.com ltd. 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 Scott Phillips.

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