Shares of electric-car charging network operator Blink Charging (NASDAQ:BLNK) collapsed today, falling 9.2% by 1:30 p.m. EST, and for reasons having nothing to do with its business. It was the company's CEO who seems to have shot Blink in the foot.
Yesterday after close of trading, CEO Michael Farkas filed a Form SC 13D/A with the Securities and Exchange Commission in which he advised that on Jan. 12 -- a date when Blink shares closed at more than $52 -- he sold 540,000 shares of common stock at just $41 each.
Farkas reaped total gross proceeds of $22.1 million from his stock sale, but Blink shareholders are taking a $200 million loss to market capitalization today as investors digest last night's news, and wonder why Blink's own boss was willing to sell so many shares at such a discount to Blink's then-current price.
The answer is that when you want to exit a large position quickly, you often have to accept a big haircut on the price you're going to get. (In Farkas' case, he also used a broker to underwrite his sales). Any more-gradual exit through the ordinary open market will be quickly noticed, and could start a panic that will drive the stock price down even further.
Viewed from this perspective, Farkas' huge stock sale may not seem quite as worrisome as first meets the eye. It's also worth noting that even after Tuesday's sale, Farkas continues to own 6.7 million shares of Blink, so he still has a big stake in Blink's success.
This may be small comfort to shareholders who are smarting from today's losses, but at least it's some comfort.