Platinum founder Kerr Neilson sells stock

It's never a good thing when founders decide to sell stock, and Kerr Neilson's decision, along with his ex-wife, to offload a fifth of their holdings is no exception - especially since it will be at a 10 per cent discount to the previous day's closing share price. The stock amounts to about 10% of the company and it's being offered to institutions at $5. With such a large block of shares becoming available at that price, the stock has unsurprisingly fallen to about that level.

That's the trouble with having large shareholders, potentially with large slabs of stock to sell. Unfortunately for Platinum shareholders, this sale doesn't clear the 'overhang'. The Neilsons still have 43% of the company and, although they've committed to not selling more shares for a year, we expect to see further sales in due course.

This could mean occasional bumps for the share price, but it has no impact at all on value. We already know that Neilson's influence within Platinum is reducing, and the investment case now rests squarely with chief executive and chief investment officer Andrew Clifford and the rest of his team. If anything, short-term bumps that have no impact on value could present buying opportunities.

The stock is down 9% since we upgraded the stock to Buy a year ago and roughly in line with our upgrade in October. However, we have since lowered our Buy price to $4.50 and we'll stick with that. HOLD

Note: Our Model Growth and Model Income portfolios own shares in Platinum Asset Management.

Note: The Intelligent Investor Equity Growth and Equity Income funds own shares in Platinum Asset Management.