If top-level insiders are selling company stock, it can pay to approach that stock with caution. Insider sales can be a signal that the stock is overvalued or that the outlook for the company is deteriorating.
Here, we are going to highlight some insider selling at Global Fashion Group SA (GFG:GR). Global Fashion Group is an emerging markets-focused online fashion retailer that operates through four websites: The Iconic, Zalora, Dafiti, and Iamoda. It’s listed on Deutsche Börse’s Xetra and currently has a market capitalization of €2.2 billion.
Global Fashion Group: insider selling
Our records show that on 30 December, Co-CEO Christoph Barchewitz sold 31,120 shares at a price of €9.88 per share. This sale, which netted the insider approximately €308,000, reduced his holding from 75,000 shares to 43,880 shares.
Buyer turned seller
This insider sale is significant because Barchewitz has recently been a buyer of Global Fashion Group shares. Our data shows that on 18 November, the insider purchased 15,000 shares at a price of €7.00 per share. However, with the shares rising about 40% in the space of around six weeks, he has turned into a seller. The fact that he has reduced his holding by 41% suggests that he sees limited share price upside in the near term.
Global Fashion Group appears to have significant momentum at the moment. Its third-quarter results, for example, showed a 26.3% increase in orders and revenue growth of 20.6% at constant currency. Meanwhile, the company recently upgraded its outlook for the 2020 year. It now expects to achieve constant currency Net Merchandise Value growth of around 25%, giving just over €1.9 billion NMV and €1.3 billion of revenue. Adjusted EBITDA is expected to be at least €10 million.
As a result of this strong financial performance, however, the company’s stock price has moved substantially higher. Over the last three months, the stock has risen about 80%. Over the last six months, it has risen about 300%.
The sale from the Co-CEO here suggests that he sees the stock as overvalued after its strong recent run. Given the size of the insider sale, we think caution is warranted towards Global Fashion Group stock right now.