Canada Goose Holdings: Why Are Some Insiders Cutting Their Stock Loose?

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Pending share sales by Canada Goose Holdings insiders and Company management could be a sign that this stock has topped

SmallCapPower | June 14, 2017: Canada Goose Holdings Inc. (TSX: GOOS) announced early Wednesday morning that it has filed to sell $322 million worth of subordinate voting shares for some of its shareholders, adding that the Company won’t receive any money from the sale of these shares.

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Canada Goose Holdings said that the investors selling include the Company’s principal shareholders and certain members of the management team.

As of June 2, 2017, there were 23,144,060 Canada Goose Holdings subordinate voting shares issued and outstanding, and 83,308,154 multiple voting shares issued and outstanding.

Canada Goose Holdings shares were down 3% to $28.69 midday Wednesday on the Toronto Stock Exchange. Based on the current stock price, this stock sale represents about 11.2 million shares, or almost half of the total issued and outstanding subordinate voting shares.

Before going public, about 30% of its stock was controlled by its CEO Dani Reiss, whose grandfather founded the Company in 1957. Bain Capital, which bought a 70% stake in Canada Goose Holdings in 2013 for an undisclosed amount, controlled 68% of the voting rights after the IPO.

Canada Goose Holdings went public on March 16, 2017, with 20 million shares offered at C$17 apiece. Thus, its stock price has increase nearly 70% in less than three months.

Canada Goose Holdings recently reported its Fiscal 2017 financial results and provided guidance for the next three fiscal years, saying it expects annual revenue growth on a percentage basis in the mid-to-high teens, and growth in adjusted net income per diluted share of about 20% per year.

That being said, prevailing wisdom has suggested that insiders will often take a company public when they believe that its valuation is close to peaking. More than a few analysts on the Street have questioned where Canada Goose Holdings’ growth will come from and how the stock’s current valuation can be justified. After all, how many people are willing to pay more than $1000 for a winter jacket?

Disclosure: Neither the author nor any of the principals at Small Cap Power, or their family members, own shares in any of the companies mentioned above.

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