Why is the Nick Scali share price sinking 10% today?

It seems that investors have been spooked by some insider selling news.

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The Nick Scali Limited (ASX: NCK) share price is having a tough session.

In morning trade, the furniture retailer's shares are down over 10% to $10.40.

Why is the Nick Scali share price under pressure?

Investors have been heading to the exits this morning in response to news of some major insider selling.

According to the release, Nick Scali's managing director and CEO Anthony Scali has sold 4.6 million shares by way of a fully underwritten block trade.

Based on where the Nick Scali share price ended yesterday's session, the value of these shares was approximately $53.45 million.

However, according to the AFR, the block trade was underwritten at a 5.3% discount of $11.00 per share, which values the stake at $50.6 million.

Why the selling?

The company revealed that the partial disposal of Anthony Scali's shareholding is to diversify the family's assets. It also highlights that the sale will increase the free float of the company, with the shares to be sold to institutional investors.

While insider selling rarely goes down with the market, which makes the Nick Scali share price weakness today unsurprising, it is worth noting that Mr Scali remains the company's largest shareholder after this sale.

Following the sale, Anthony Scali will retain 6,439,474 Nick Scali shares, which equates to an ownership of 7.95% of shares on issue. It's fair to say that the CEO's interests remain firmly aligned with shareholders.

Should you buy the dip?

The team at Citi is likely to see this as a buying opportunity. Last month, the broker put a buy rating and a $13.35 price target on its shares.

This implies a potential upside of approximately 28% over the next 12 months.

It also named the company as one of its two "top picks in small cap retail."

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Nick Scali. 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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