Firm Sold Martha Stewart Shares
Former Martha Stewart Living Omnimedia Inc. Chairman Jeffrey Ubben sold most of his investment firm’s stake in the company as the stock traded near a five-year high before Martha Stewart’s release from prison, a regulatory filing showed Tuesday.
Ubben, whose ValueAct Capital Partners was once the biggest outside shareholder of Martha Stewart Living, sold 1.24 million shares for $42.7 million, according to the filing. The move cut ValueAct’s ownership to less than 1% from 6.1% in December.
The stock, which soared before Stewart’s release Friday, has since fallen 16% amid concern that restoring the company’s profitability will take time. Stewart must remain at her Bedford, N.Y., estate except for 48 hours of work and errands a week, after serving five months in prison for lying to regulators.
“Insiders don’t believe the stock will go any higher,” said Gary McDaniel, a Standard & Poor’s equity analyst.
Executives and board members have sold 4.2 million shares in the last six months for a total of about $108 million, McDaniel said. Martha Stewart Living shares fell $2.02 to $25.92 on the New York Stock Exchange.
Ubben, 43, first bought Martha Stewart Living stock in January 2002 and owned a 21.4% stake in June, according to a Securities and Exchange Commission filing. That was the largest block after Stewart, 63, the founder and controlling shareholder.
ValueAct sold the latest group of shares between Feb. 28 and March 3 at prices ranging from $32.66 to $35.58, according to the SEC filing. At Monday’s closing price of $27.94, the sale would have generated $34.6 million.
Ubben didn’t return a call seeking comment. The investor, who is based in San Francisco, took over from Stewart as chairman of Martha Stewart Living in July 2003 when she stepped down because of her legal case. He was replaced in July by Thomas C. Siekman.
In an interview in November, Ubben said he had recently sold 2 million Martha Stewart Living shares because ValueAct wanted to take its “risk levels down.” At the time, he was keeping the 6% stake to benefit from an expected increase in its value before Stewart’s prison release, Ubben said.
Stewart was convicted of obstructing an investigation into her sale of ImClone Systems Inc. stock. Her company last year lost $59.6 million as magazine advertising plunged and a TV show she once hosted was canceled.
Still, the stock price at its peak last month had tripled from when Stewart was sentenced July 16. Investors bet the company would benefit from a new version of NBC’s “The Apprentice” featuring Stewart and from the $11-billion purchase of Sears Roebuck & Co. by Kmart Holding Co., which sells Martha Stewart products, said Jim Chanos, president of short-selling firm Kynikos Associates.
Short sellers borrow shares and sell them in anticipation of being able to buy them back later at a lower price.