The Australian Ethical Investment Limited (ASX: AEF) share price has come under pressure on Friday.
In morning trade the ethical investment company’s shares are down over 15% to $5.06.
Why is the Australian Ethical share price tumbling lower?
The Australian Ethical share price has dropped lower today after one of its major shareholders offloaded the majority of its holding.
According to an announcement by IOOF Holdings Limited (ASX: IFL), the financial services company has sold approximately 14.2 million shares or 72% of its shareholding of 19.7 million shares in the investment company.
This sale has reduced the company’s stake to approximately 5.5 million shares, which equates to a 4.9% interest in Australian Ethical.
IOOF sold the shares for a total consideration of $74.5 million, which represents an average of $5.25 per share. This compares to the last close price of $5.99, which is implying a sizeable 12.5% discount.
It is also significantly lower than the 52-week high of the Australian Ethical share price. It reached a high of $9.07 in mid-June.
Why is IOOF selling Australian Ethical shares?
IOOF’s Chief Executive Officer, Renato Mota, revealed that the sale was part of the company’s plan to simplify its business.
He commented: “Our investment in Australian Ethical has realised significant returns for our shareholders. This sale aligns to our transformation strategy which includes simplification of our business. We remain committed to providing access to ethical investment for the benefit of our clients as well as society generally.”
“Australian Ethical’s award winning funds will remain available alongside several other ethical investment options on our platforms,” he added.
The company advised that the proceeds from the divestment will be used to reduce its debt and provide strategic flexibility for growth opportunities. The impact on its underlying net profit after tax will not be material.
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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Australian Ethical Investment Ltd. The Motley Fool Australia has recommended Australian Ethical Investment Ltd. 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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