Shares of Stitch Fix (SFIX 5.00%) popped on Wednesday after a director purchased a lot of shares in the company. At 10:30 a.m. ET, Stitch Fix was up a whopping 17%, whereas the major indices were trading sharply down.
Bill Gurley is one of Stitch Fix's independent directors. And on Tuesday afternoon, a filing with the Securities and Exchange Commission (SEC) revealed he had purchased 1 million shares of Stitch Fix at an average price of about $5.43 per share. In other words, Gurley took over $5.4 million of his own money to invest in Stitch Fix.
As far as Stitch Fix goes, this investment is small. After all, as of this writing, the stock has a market capitalization of over $650 million. A $5.4 million investment is small by comparison. However, for Gurley, the investment is quite large. Prior to yesterday's announcement, he owned just over 2.2 million shares of Stitch Fix both directly and indirectly. Therefore, he increased his position by almost 50%.
Investors almost always interpret news like this positively. After all, as a director, Gurley has a front-row seat. Therefore, if anyone has an informed opinion on Stitch Fix's forward prospects, it's someone like Gurley. And Gurley is clearly bullish.
But Gurley's bullish stance is increasingly contrarian when it comes to Stitch Fix. In the most recent quarter, the company lost clients, revenue was down, and its net loss widened, which led to layoffs. Developments like these are why Stitch Fix stock is down nearly 70% year to date.
Stitch Fix isn't expected to report financial results for the fiscal fourth quarter of 2022 until September. But it will be interesting to see if things have started to improve.