Stewart Investor Sells Half of Stake

Martha Stewart Living Omnimedia Inc.’s former chairman and largest outside holder, Jeffrey Ubben, sold more than half his stake in the company this month as the shares reached their highest price in more than two years.

Ubben’s ValueAct Capital Partners sold 2 million shares valued at $38.6 million, regulatory filings show. Ubben, a 43-year-old investor who first bought Martha Stewart Living stock almost three years ago, was named chairman in June 2003 and stepped down in July after Stewart was sentenced for obstructing justice.

Ubben sold just as investors drove up the stock on optimism that Martha Stewart’s return to the company in March and Kmart Holdings Inc.’s purchase of Sears, Roebuck & Co. would reverse losses. Shares of New York-based Martha Stewart Living have risen 93% since Sept. 15, when Stewart decided that she wanted to start serving her five-month prison term.

“The stock has moved up on hope, conjecture and speculation,” said Ivan Feinseith, director of research at New York-based Matrix USA.

Ubben “made a bold bet and it has paid off,” Feinseith added.

Shares of Martha Stewart Living rose $2.89 to $24.63 on the New York Stock Exchange on Friday. Earlier they hit $25, a 52-week high.

Sharon Patrick, who resigned as chief executive on Nov. 11, sold 1.36 million shares for $25.5 million Nov. 17 and 18, according to stock-trade tracker Washington Service. Susan Lyne, former president of Walt Disney Co.’s ABC Entertainment, replaced Patrick.

“We are taking our risk levels down,” Ubben said about the share sales in an interview Tuesday. “We made some money on half of our position. We expect to let the other half of our investment ride and benefit from Martha’s return.”

Martha Stewart Living will improve its performance under Lyne, Ubben said.

“The opportunities are abundant with Martha’s return and Susan’s ability to execute,” Ubben said.

Martha Stewart Living spokeswoman Elizabeth Estroff declined to comment.

Ubben’s ValueAct sold the 2 million shares from Nov. 12 through Nov. 18 at prices from $17.47 to $19.67, according to filings with the Securities and Exchange Commission and Washington Service data. The biggest sale, 1.43 million shares at $19.67 each, took place Nov. 17.

ValueAct now owns 1.73 million Martha Stewart Living shares, or 8.38% of the company.