The share price of All Ordinaries Index (ASX: XAO) online luxury retailer Cettire Ltd (ASX: CTT) has tumbled since the company announced its founder and CEO had offloaded $60 million worth of its stock.
But one fundie is unbothered, nay, encouraged by the sale … for now.
The Cettire share price is $1.51 today. That's 10.7% lower than it was before the company's boss Dean Mintz sold 41 million shares for $1.46 apiece under a block trade last month.
For comparison, the All Ords has gained 0.24% over the period.
Let's take a closer look at why EGP Capital chief investment officer Tony Hansen is giving Mintz a pass on his most recent sale.
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Insider selling of All Ords share not worrying, yet: fundie
While Cettire remains among the top holdings in the EGP Concentrated Value Fund as of the end of November, Hansen is unbothered by Mintz's decision to sell a whopping 10.8% stake in the company.
The fundie commented in the fund's November update, saying:
[I]t is not unreasonable for a founder who finds perhaps 99% or more of their net worth tied up in a single business … to wish to crystallise some of that wealth …
Investors more broadly clearly feel … that the sale indicates a lack of faith in the longer-term prospects of the business.
I am willing to give the benefit of the doubt for now, in his position I feel I would have done something similar.
Hansen pointed to Nathan Tinkler as an example of what can happen when an insider fails to comply with "personal risk management."
Tinkler famously became a self-made billionaire in the 2010s after successful forays in coal.
He ultimately sold a hefty chunk of Whitehaven Coal Ltd (ASX: WHC) shares in 2013 in a bid to pay off debt, seeing him tumbling from rich-lister fame.
The former billionaire's holding in Whitehaven "would still be worth in the region of $1 billion had he not been forced to sell to repay debts," Hansen wrote, continuing:
The fact that Dean Mintz is clearly more conservative than someone like Nathan Tinkler is incredibly pleasing to me, it shows a streak of prudence I hope all our CEO's possess.
But the fundie mightn't be so forgiving in future
Looking forward, however, the fundie doesn't see a reason Mintz would need to sell any more shares in the All Ords retailer.
The founder has now liquidated more than $100 million worth of shares this year – $60 million last month and $47 million in March.
Hansen noted that while "taxes have surely eaten a hole in that figure" he believes "our CEO should now have more liquid wealth than he is ever likely to need".
Additionally, the fundie pointed out that Cettire is now delivering profitable growth. It posted adjusted earnings before interest, tax, depreciation, and amortisation (EBTIDA) of $5.5 million on a delivered margin of over 20% last quarter.
Thus, Mintz, with a 45.9% stake in the All Ords company's shares, could benefit from dividends. Hansen tips that even a payout ratio of 30% to 40% could "generate a significant annual income".
