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Nick Scali (ASX:NCK) share price sinks after CEO sale

The Nick Scali Limited (ASX: NCK) share price is down 9% after telling the market its CEO had sold shares.

Nick Scali is a furniture retailer with a network spanning Australia and New Zealand. In the last couple of years, it bought the Plush-Think Sofas business.

CEO sale

Nick Scali said that Managing Director and CEO Anthony Scali has sold 4.6 million shares in the company through a fully underwritten block trade, and it will be lodging the official paperwork with the ASX separately.

The ASX furniture retailer said the reason for the partial disposal of Anthony Scali’s shareholding in the company was to “diversify the family’s assets and it will increase the free float of the company”, with the shares to be sold to institutional investors.

After the sale of these shares, Anthony Scali (through his family investment company called Scali Consolidated Pty Ltd) will still have approximately 6.44 million shares in the company and will be its largest shareholder with ownership of 7.85% of Nick Scali shares on issue.

Scali Consolidated Pty Ltd reportedly “does not intend to dispose of any beneficial interest in its retained shares in the medium-term.”

Nick Scali said that Anthony Scali remains “committed to driving the growth and profitability of the business.”

Is this a good time to invest in Nick Scali shares?

I like the Nick Scali business, it offers solid returns in shareholder terms with things like the dividend yield and the return on equity (ROE).

In my opinion, it’s understandable that the Scali family wants to diversify the wealth and add more shares able to be traded on the market.

However, why now to do the sale? Are furniture sales about to fall noticeably after FY23 following all of the interest rate rises (including the latest one)?

I believe Nick Scali has a good long-term future, but the short-term could be difficult. I’d wait on the sidelines, perhaps until the FY24 half-year result release in February (and trading update), and then consider investing if the Nick Scali share price is where it is today or lower.

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At the time of publishing, Jaz does not have a financial or commercial interest in any of the companies mentioned.
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