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Why the Smartgroup share price was smashed today

The worst performer on the S&P/ASX 200 index on Wednesday has been the Smartgroup Corporation Ltd (ASX: SIQ) share price.

The salary packaging and fleet management services provider’s shares fell as much as 10% to a 52-week low of $7.26 this morning.

At the time of writing they are currently trading almost 9% lower at $7.38.

Why is the Smartgroup share price being hammered today?

Investors have been heading to the exits in their droves on Wednesday after the company announced that its managing director and CEO, Deven Billimoria, has offloaded a significant number of shares.

According to the change of director’s interest notice, Mr Billimoria has sold 1.1 million of the company’s shares through an on-market trade on Tuesday.

The managing director and CEO received a total of $8.36 million for the sale, equating to $7.60 per share.

Mr Billimoria advised: “I have elected to sell down a minority portion of my shareholding for personal reasons. I remain a long-term shareholder and as ever am excited about, and fully committed to, Smartgroup.”

This sale has reduced his holding down by 27% to a total of 2,952,764 shares. It also means that he will miss out on the upcoming special dividend for these shares.

Earlier this week Smartgroup announced a fully franked 20 cents per share special dividend. Its shares go ex-dividend for it on April 12.

Should you panic?

Whilst insider selling is very disappointing, given Mr Billimoria’s sizeable remaining stake, I wouldn’t panic too much about this sale. With such a large holding, I believe his interest remain aligned with shareholders.

Furthermore, it is worth noting that just over a month ago analysts at Ord Minnett slapped a buy rating and $11.20 price target on its shares. If Smartgroup’s shares were to hit this level, it would mean a gain of over 50%.

I would agree that it is a buy at this level and would choose it ahead of rivals Eclipx Group Ltd (ASX: ECX) and McMillan Shakespeare Limited (ASX: MMS).

Not sure about Smartgroup after the insider selling? Then check out these dividend shares that have been rated as buys.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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