ASX investors are today taking a break from trading Afterpay Ltd (ASX: APT) shares. After an incredible month where the Afterpay share price rose by more than 34%, you might be forgiven for thinking that investors might just want to take a breath and calm down a little. But no, it’s because Afterpay is today, at the company’s request, in a share trading halt.
Afterpay is hoping to raise $800 million from investors at $61.75 a share, which is around a 9% discount to the most recent share price of $68. Bargain, right?
Well, it might be for you if you’re bullish on this company’s long-term future. But the fact that Afterpay only reached $61.75 a share for the first time ever last week hardly makes it a deal for the ages in my view.
But I digress.
Also included in the announcement of this trading halt and capital raising was an interesting side note. While asking investors for an additional $800 million for the business, Afterpay also told us that its co-founders Anthony Eisen and Nicholas Molnar are planning to offload 4.1 million of their own shares (2.05 million each). That’s a nice ~$250 million retirement fund right there.
So if Eisen and Molnar are selling shares right now, should Afterpay investors take the hint and follow suit? ‘You should buy shares even if we’re selling’ is something of a conflicting message from management, to say the least.
Should Afterpay investors read between the lines?
Having a set of co-founders selling shares in their company is never really a good sign. But I also don’t think it’s necessarily a bad thing either. Last week, I wrote an article about why investors shouldn’t always worry about insider selling. The same principles are in play in this situation.
The co-founders’ sale represents around 10% of both Eisen and Molnar’s total position in Afterpay. Both of these gentlemen will retain around 18.4 million shares each (each worth approximately $1.25 billion), which is still a large enough stake to conclude (in my view) that both still have significant ‘skin in the game’ for Afterpay going forward.
Eisen and Molnar are likely to be pursuing diversification of their own wealth with these sales. I won’t blame them for this financial prudence — diversifying your assets away from one single investment is usually a wise thing to do.
So overall, I don’t think Afterpay investors should be too concerned with this insider selling right now. If I were Eisen or Molnar, I would find it difficult to say no to the current sale price offering myself. If you’re already an Afterpay investor, your next choice is whether to buy Eisen’s and Molnar’s shares off them!
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More reading
- Leading brokers name 3 ASX 200 shares to sell today
- ASX 200 up 0.1%: Afterpay announces capital raising, big four banks lower ahead of RBA meeting
- Does Afterpay have a competitive advantage?
- Sezzle share price rockets 20% higher on record Q2 result
- Afterpay expects sales to double to $11bn and launches $800m cap raise
Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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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