What happened
Investors feel confident when the top managers at their companies load up on stock or at least don't divest large blocks of it. This is a key reason why Peloton Interactive's (PTON 4.29%) shares suffered a more than 8% hit on Thursday.
So what
In a regulatory filing time-stamped after market hours on Wednesday, Peloton revealed that former CEO John Foley sold around $50 million worth of his stock in the exercise hardware and software company.
Image source: Getty Images.
The buyer was MSD Partners, which describes itself as a firm that "deploys capital on behalf of Dell Technologies founder and CEO Michael Dell and his family, as well as other like-minded, long-term-oriented investors."
Streetinsider.com quoted the company as saying that Foley's big share sale was entirely his own decision and that it was "based on his own financial planning." Neither MSD Partners nor Dell Technologies has commented on it.
Peloton is currently in the midst of a big C-suite transition. Last month it announced that Foley, who is also a co-founder of the company, would be vacating the CEO seat and transitioning to the post of executive chair, effective Feb. 9. He was replaced by seasoned executive Barry McCarthy, who has had tenures as CFO at both music broadcaster Spotify and video streaming giant Netflix.
Now what
It's never wise for investors to base their buy/sell/hold decisions on a onetime top executive's moves with their stock. Such officials often have financial motives that have nothing to do with their company's operations or its prospects.
That said, it's not a good look when said executive -- and a co-founder to boot -- unloads a big pile of shares. Today's sell-off might be based more on concern (and even panic) than anything else, but the reaction is hardly surprising.
