Shares of Camping World Holdings (NYSE:CWH) were down more than 7% on Thursday afternoon -- and had been off by more than 10% earlier in the day -- after a major stakeholder offered shares in an overnight sale, increasing the supply of the stock available on the open market.
It's been a good year for Camping World. The COVID-19 pandemic has caused many people to rethink their summer vacation plans and has increased demand for recreational vehicles; as a result, Camping World shares have gained more than 120% year to date.
But after U.S. markets closed Wednesday, Morgan Stanley executed a block trade of 6 million Camping World shares priced at between $35 and $35.50 apiece, a slight discount to Wednesday's close. Bloomberg said the seller was Crestview Partners, one of the company's largest shareholders.
These sorts of transactions tend to put near-term downward pressure on share prices because they add additional significant quantities of shares to the public float -- the portion of a company's shares that are available to trade. In this case, the sale increased Camping World's public float by about 19%.
This type of sale can also be seen as a sign that the institutional holder thinks there are better investment opportunities elsewhere -- and that can cause other investors to head to the sidelines.
It's important to remember that while the added float can push share prices downward in the short term, it does not alter the fundamentals of the business. Camping World has been one of the top consumer discretionary stocks of 2020, but it still trades below where it did in early 2018. Prior to the pandemic, Camping World was in the early stages of a transformation -- part of its effort to recover from its ill-fated decision to buy the Gander Outdoors brand -- and it still has work to do to complete that transition.
I doubt the pandemic-fueled RV-buying binge is sustainable, but the strong first half of 2020 if nothing else has added to Camping World's financial firepower as it restructures. And the new customers should help fuel recurring revenue for the company's Good Sam membership club, which provides service and assistance to drivers.
For long-term shareholders who believed in the company two days ago, Crestview's stock sale is no reason to hit the brakes now.