Sometimes one of the biggest clues you can get as an investor is to examine what company insiders are doing with their stocks. After all, if the CEO doesn’t have confidence that the company’s shares will hold value, why should you? That brings us to the unfortunate tale of ContextLogic (NASDAQ:WISH) stock
ContextLogic is an e-commerce company that operates the Wish retail platform. A year ago, the company went public on the Nasdaq exchange at $24 per share.
I’m sure that the firm’s C-suite had dreams of ContextLogic beginning to lay the groundwork to become another Amazon (NASDAQ:AMZN). Or at least ContextLogic’s management thought that it would take a bite out of Amazon’s gigantic market share.
But that hasn’t happened. WISH stock has been a huge stinker in 2021, falling to penny-stock status as it closed yesterday at just $3.19.
And its CEO, Piotr Szulczewski, is bailing out – both from the job and from WISH stock.
Selling Off Shares
ContextLogic announced on Nov. 10 that Szulczewski would step down as CEO by Feb. 1, although it added that Szulczewski, the company’s founder, would remain on its board of directors. The company has already started a search for a new leader.
“As Wish’s Founder and CEO for more than 10 years, Piotr has played an instrumental role in creating a global, publicly traded, billion-dollar ecommerce marketplace that millions of shoppers use every day,” said Tanzeen Syed, the lead independent director of Wish. “He has laid the groundwork for Wish to continue to grow and thrive and will leave the business in the capable hands of our new, highly talented and invigorated leadership team.”
Of course, Szulczewski surely wouldn’t be going anywhere if the company was moving in the right direction. He also wouldn’t be leaving if the firm’s stock price hadn’t dropped more than 80% in 2021.
But it’s also interesting that Szulczewski is systematically shedding shares of WISH stock. That doesn’t seem like something he’d do if he had any faith that ContextLogic would rebound soon.
For instance:
- Szulczewski sold 77,886 shares on Dec. 17 at an average price of $3, raking in $233,658.
- On Nov. 17, he sold 77,290 shares at an average price of $4.89, making $377,948.
- And on Oct. 18, he sold 73, 904 shares of WISH stock at an average price of $5, bringing in $369,520.
Szulczewski is still deeply invested in ContextLogic. According to a recent form filed with the Securities and Exchange Commission, he still owns 56.5 million shares of WISH stock.
But he’s not the only one who’s selling shares. The Motley Fool reports that WISH stock insiders had sold over seven times more stock in the last three months than they had bought.
The data makes me think that investors should follow suit.
WISH Stock at a Glance
ContextLogic’s third-quarter results weren’t good. The company announced that its revenues had dropped 39% year-over-year. And it acknowledged that its Q4 revenue would come in below its Q3 sales.
When an e-commerce company’s revenue actually drops during the Christmas shopping season, it’s in serious trouble.
InvestorPlace columnist Mark Hake paints a pretty bleak picture of WISH stock. He points to the company’s cash flow statements, which shows its operating cash flow over the first nine months of 2021 coming in at -$902 million. ContextLogic burned $344 million of cash in Q3 alone.
“The $344 million Q3 cash burn works out to $1.376 billion,” Hake wrote. “The problem is, ContextLogic has just $1.072 billion in cash and $143 million in marketable securities. Total cash and securities are only $1.215 billion.”
I agree with Hake’s assessment that the new CEO will be either borrowing money, raising equity or slashing expenses to right the ship. Whatever happens, it won’t be great for shareholders in the short-term.
The Bottom Line
The last time I wrote about WISH stock, I said ContextLogic is a David versus Goliath story that won’t end well. Despite how much we like to root for underdogs, ContextLogic doesn’t have the wherewithal to stand up against a company like Amazon.
But even I’m surprised by how quickly WISH stock fell; it’s tumbled over 50% since I wrote those words in late September.
Now that ContextLogic is a penny stock, investors will have to decide if this battered equity is worth buying on the cheap.
The company’s insiders are saying the shares are not worth holding. That pretty much says all you need to know.
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On the date of publication, Patrick Sanders did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Patrick Sanders is a freelance writer and editor in Maryland, and from 2015 to 2019 was head of the investment advice section at U.S. News & World Report. Follow him on Twitter at @1patricksanders.