You can say one thing about the insiders at Sharper
Image, including chief executive Richard
Thalheimer, they are sharp enough to know when to
sell.
In the middle of an Internet-jazzed holiday season,
management sold almost a half-million shares of
their stock.
To be sure, it was a rare opportunity. For much of
this decade, Sharper Image has been nothing but
fuzzy and dull. Its merchandise mix has missed, and
its stock has lagged. But lo and behold, the online
investment world discovered that the San Francisco
retailer sold stuff over the Internet and, bingo, its
stock caught fire, rising briefly above $20 a share.
That's a far cry from September 1 when it reached
a 52-week low of $2.50 a share, and November
19 when it traded as low as $5 a share.
But Net mania changed all that. Taking advantage
of what was considered the first Internet Christmas,
Sharper Image published a press release on
November 30 to tout its stellar sales over the critical
Thanksgiving weekend. It reported that total
revenues were up 50 percent compared to the same
period a year earlier, thanks in part to online orders
from its Web site.
The result: dot-com madness blew in like an arctic
blast. Sharper Image shares soared to their
52-week high of $21.19 that same day.
The full bounce didn't last very long. The retailer's
shares plunged nearly seven bucks the following
day.
Still, the net benefit from early holiday sales results
was a stock price that was more than triple what it
was about two weeks prior, closing at $17
yesterday.
So, what did you expect any self- respecting insider
to do? Why, dump shares, of course. Five top
executives and a board member at Sharper Image,
including Thalheimer, unloaded more than 473,900
common shares of Sharper stock in December,
according to filings with the Securities and Exchange
Commission.
Four of the brass, including Chief Financial Officer
Tracy Wan and Chief Operating Officer Barry
Gilbert, totally liquidated their stakes in the
company. As for Thalheimer, the CEO, he sold
about 284,000 indirectly owned shares between
December 1 and December 29 at prices ranging
from $13.42 to $16.58 per share. Thalheimer's
indirect stake was about 4.3 million shares after the
transactions.
What's more, a trust in his name unloaded 60,750
shares between December 1 and December 29 at
prices ranging from $13.00 to $16.58.
Usually, investors would view such pragmatic
profit-taking by the CEO with disdain. But in the
case of Thalheimer, selling turns out to be a good
thing for shareholders because he owns too many
shares. He has controlled more than 60 percent of
the 8.7 million shares outstanding, which makes for
a rather illiquid stock. And that practically prevents
most institutional investors from wanting to take
positions.
In fact, Thalheimer sold off shares earlier in the
fourth quarter, and Wall Street applauded the
move. Thalheimer could not be reached for
comment.
''It's good news. You would expect him to sell (at
those share prices),'' says analyst Alan Davis of Red
Chip Review in Portland, Ore., a small-cap
research firm.
On the other hand, the selling by other insiders was,
by no means, a positive signal to outside investors,
Davis says.
Davis, one of few analysts who follow the small-cap
stock, recommended it as a buy in early November
based on changes in merchandise and the opening
of new stores. Sharper Image's same-store sales, a
key retail benchmark, climbed about 8 percent in
December -- demonstrating some fundamental
improvement in operations and strategy, Davis says.
However, he notes, that online shopping hype is
responsible for the lofty share price, noting only 5
percent of the company's revenues come from
Internet-generated sales.
And the hype isn't over. Sharper Image issued a
press release on Monday declaring that it had
created an auction function to its Web site. But
Davis says the new wrinkle is merely an inventory
management vehicle and will not compete with
established Net auctioneers eBay or Onsale.
Nonetheless, Sharper's shares still soared $8.25 on
the news.
''Coming out with a press release calling it an
auction site is curious,'' Davis says. ''(But) it's
definitely going to hurt the stock.'' |
