Cettire shares are under big pressure after the boss sells shares yet again

Nick Sundich Nick Sundich, March 7, 2024

It hasn’t been a good week for Cettire shares. The ecommerce player is one of the few to be better off than it was pre-pandemic from a share price perspective. This is for several reasons including advantages to its business model and a solid financial performance. Events in the past week have done it no favours, however.

 

Cettire (ASX:CTT) share price chart, log scale (Source: TradingView)

 

Recap of Cettire

Cettire listed on the ASX in 2019 at 50c per share and hasn’t looked back. Unlike other ecommerce outlets it has a focus on high-end fashion which is less likely to be impacted by an economic downturn. Although middle-class consumers are doing it tough, the wealthiest are continuing to spend and this has been seen in its results. In FY23, it nearly doubled its sales revenue, grew its active customers by 63% and delivered a margin of 23% – impressive in what is typically a low-margin industry.

Another positive trait is that unlike a conventional fashion retailer, Cettire does not bear manufacturing costs.

Disadvantages that Cettire faces are that it relies heavily on marketing, bears delivery costs to the end customer, as well as intensive industry competition.

 

Cettire shares – beware the ides of March

Cettire had a decent February after releasing its 1HY24 results. It grew revenues by 89%, EBITDA by 56% and it made a profit of $16.4m. March has not been so good, however.

Last Monday (March 4), Cettire told investors CEO Dean Mintz was selling shares yet again. This time he was selling 27.5m shares at an average price of $4.63 per share. He still holds a 30% stake in the company and agreed to escrow his remaining holding for 6 months. But…he once held a majority of stake, and keep in mind that it has only been 6 months since his last sale.

 

Why is this a problem?

What’s the big deal you might ask? We’ll answer that question with a question of our own: Why would he be selling his shares in Cettire if he sees further upside? There’d be no one better to answer that question than Mr Mintz himself, although he has shied away from the media spotlight ever since the company listed. Yes, the company said there was investor demand and strong liquidity, although it remains to be seen what this sale will achieve that the others evidently didn’t (or at least not enough to prevent the need for another sale).

 

Tax issues too?

Two days later, the AFR published an investigation that revealed duties charged by Cettire on goods may not have been paid to the federal government. Investors sold off the stock, unsure whether this was a legal part of the business model, or something that could get it into trouble.

The company responded within a couple of hours of the market opening. It told investors its business model was to ship it DDP (Delivered Duty Paid). Consumers are the ones who ultimately pay duties although the business must charge it. Responding to the article, in which the authors noticed a shipment came ‘Duties & Taxes Unpaid’, it told investors DHL would pay in this case, whether before or after the shipment – Cettire would not be on the hook. It also said it had a direct debit arrangement in place within the Australian Department of Home Affairs to facilitate direct payment of duties prior to customs clearance.

 

So much ado about nothing?

Seemingly the latter issue is. As for the former, only time will tell if another sell down occurs as soon as it is permitted. This incident should warn investors of all stocks that it can only take one media article to impact a company’s share price – and even the hottest of companies are not immune from a decline.

 

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