The Redbubble Ltd (ASX: RBL) share price sank around 7.5% after the market heard of an insider share sale.
What happened to the Redbubble share price?
In early trading this morning, Redbubble shares dropped to $3.88 after it was announced that Mr Martin Hosking sold a large amount of Redbubble shares.
Mr Hosking is a current non-executive director and was/is a co-founder of the business. He was also the CEO until recently.
He has sold 5 million shares for a total of $21 million.
Why did he sell so much? Redbubble said in a statement that it was done so that Mr Hosking could meet financial commitments. The net proceeds (after tax) will be used by Mr Hosking to close out an existing loan facility that Mr Hosking has with Equities First Holdings LLC.
Equity First holds security over 18 million Redbubble shares that Mr Hosking has an interest in. As Mr Hosking closes out the loan (which will occur in a number of payments over 10 months from December 2021), Equity First will release its security over those Redbubble shares.
Is this something to worry about?
The market certainly thought so, sending the Redbubble share price down 7.5% quickly. However, at the time of writing, Redbubble is only down by around 1%.
Mr Hosking will still be the largest shareholder of the business, owning 39.5 million shares, being 14.4% of the business.
Redbubble also said that Mr Hosking has confirmed he remains committed as a long-term significant shareholder.
Over the years, leadership selling shares of ASX companies could be a warning sign that bad news was coming, or perhaps just that the share price may have gone a bit too high. That’s not always the case though – just look at how the share price of Pro Medicus Ltd (ASX: PME) has gone after management sales.
Summary thoughts about this and the Redbubble share price
I’d prefer to give the leadership the benefit of the doubt. As a non-executive director, Mr Hosking isn’t involved in the day to day running of the business.
The FY21 result update was promising. The long-term still looks compelling for Redbubble with the rapid growth of e-commerce and the potential for strong operating leverage in the coming years.
