Whenever a member of an ASX 200 stock's management team sells out of some shares of their own company, it causes some raised eyebrows to say the least.
Shareholders understandably want the people running their companies to have as much skin in the game as possible. After all, it's nice to know that the well-paid people in charge are at least somewhat financially aligned with investors. Investors who have entrusted their capital to them, nonetheless.
Yes, according to an ASX release put out this morning, Life360 CEO co-founder and CEO Chriss Hulls, has just sold US$4 million ($6.04 million) worth of shares in his own company.
Life360 is the company behind the popular Life360 app, used for location sharing, communication and other safety features aimed at families. It was founded in 2008 by Hulls and Alex Haro.
The Life360 share price has had a bumpy, but overall successful time on the share market over the past few years. At roughly $7.48 a share today, this ASX 200 stock remains well down from its late 2021 peaks of close to $14.
Saying that, investors have still enjoyed a decent return of around 42% since the company's 2019 ASX debut, as you can see below:
But should investors be worried that this ASX 200 stock's CEO is making such a large sale?
Should ASX 200 investors be wary of this CEO stock sale?
Well, here's how Hulls justified this big move to investors:
I am undertaking this sale to cover personal tax obligations related to the June 2023 settlement of my previously disclosed share-backed loans and this transaction. The taxes are due beginning in January 2024 and as a result, this is the last trading window for me to sell to fund these obligations. As the overwhelming majority of my assets are in shares of Life360, this is my primary means to cover this liability.
While I do not have any other major liabilities coming due, I plan to slowly diversify my holdings over the next five years in-line with US market norms, where founders with significant concentration in their companies regularly implement conservative diversification plans. After this five-year period, I still expect the majority of my net worth will remain in Life360 shares.
For what it's worth, ASX filings show that Hulls still owns just over 3.5 million ASX CHESS Depositary Interests (CDIs) of Life360. As well as 942,674 US-listed shares (equivalent to 2.83 million CDIs) directly.
That's a total of 6.34 million CDIs. A number that would be worth approximately $47.5 million today.
As such, the sale of $6 million shares arguably doesn't seem quite so significant in the scheme of things.
It's arguably not unreasonable for a CEO of an ASX 200 stock to at least somewhat diversify their wealth away from one single share. But shareholders have now heard from the CEO himself. So it's now up to them to decide if they approve.