Is It Time to Sell Universal Technical Institute Stock After A Long-Time Investor Dumped 3 Million Shares?

What this transaction means for investors

There are reasons insiders may sell shares in a company that have little to do with their view of the company’s fortunes. But it’s hard to look at Coliseum Capital’s sale of Universal Technical Institute stock as anything but bearish.

Coliseum invested in UTI in 2016 in a private transaction that gave the firm some shares at $2.71 and the right to convert a loan it provided into equity at a series of higher prices. Coliseum clearly converted its debt into a large number of shares in the trade school business over the past decade and was sitting on a healthy profit of many millions of dollars. By virtue of its large ownership stake in UTI, the company also had a seat on the board of directors.

On one hand, a hedge fund like Coliseum wants to eventually lock in profits on an investment, especially after 10 years since its initial investment in Universal Technical Institute. This sale may not mean Coliseum is exactly bearish on UTI, but it certainly isn’t a signal that the firm continues to see UTI as a better growth prospect than other investments it can make.

Seeing a long-time, significant shareholding insider sell out the vast majority of their position like this should be a signal for other investors in UTI to reconsider their investment rationale for the company and whether they should remain invested.

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Brendan Coffey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Is It Time to Sell Universal Technical Institute Stock After A Long-Time Investor Dumped 3 Million Shares? was originally published by The Motley Fool