Lululemon Chairman Sold $50 Million In Stock Right Before The CEO's Surprise Departure

Lululemon Athletica’s Chairman Dennis “Chip” Wilson sold $50 million worth of stock days before shares tumbled thanks to the news of CEO Christine Day’s sudden departure.

Wilson, the founder of the struggling yogawear company, set up the sales plan in December, which called for him to sell up to 5.7 million shares over an 18-month period, according to the Wall Street Journal.

He sold 607,545 shares at $81.50 on Friday (the day the board learned of Day’s departure), cashing in $49.5 million.

Wilson’s assistant told the Journal that the chairman had “no influence on trades” pursuant to the plan.

Reuters reports:

The SEC allows company executives to trade their own stock by using a preset plan known as 10b5-1, even when they have access to private information.

10b5-1 has been controversial for years. In theory, the plan is supposed to take the timing out of the hands of those with insider knowledge. However, the Journal found that board members have latitude on when to shift things around in their 10b5-1.

Wilson has been selling off chunks of his stake in Lulu since May. He has unloaded 2.3 million shares to the tune of $184.4 million so far this year. Wilson has also used 10b5-1 plans in the past.

Friday’s sale was his largest of the year. Had he waited until Tuesday — after the news of Day’s departure reached the public — he would have cashed in $8 million less.

Last year the Wall Street Journal found that among 20,237 executives who traded their own company’s stock in the week before their companies made news, 1,418 recorded average stock gains of 10% (or avoided equivalent losses). That was nearly double the 786 who saw their stock move against them. From the Journal:

Looking at executives’ trading in the week before their companies made news, the Journal found that one of every 33 who dipped in and out posted average returns of more than 20% (or avoided 20% downturns) in the following week. By contrast, only one in 117 executives who traded in an annual pattern did that well.

Lululemon’s shares plummeted as much as 15% on Monday (and 17% on Tuesday) after Day announced her departure.

All of this comes in the wake of Lulu’s embarrassing, massive recall of see-through yoga pants in March.

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