Insider Selling at Michael Kors Holdings Ltd (KORS) Hurts Investors: News Corp (NWSA), Google Inc (GOOG)

Remember that fall that your son’s school football team made it to the state championship game? They worked so hard every day, practicing and running, with you sitting there on the sidelines cheering them on. Then they needed cash to get to the big game and you ponied up a few grand. They were so happy, they put your name on the jerseys.

Then the day came. Tickets to the sold-out game were going for $250 — this was going to be great! But you never found out, because $250 in your pocket was too hard to resist, so you sold your ticket and drank at the bar instead.

If that rings a bell, you might be the eponymous founder of Michael Kors Holdings Ltd (NYSE:KORS).

The man whose name graces the arms of celebrities and the gowns of first ladies has announced that his share of the company is going to fall even further because he could really do with another $185 million right now. After the transaction, he’s down to a mere 2.4% of the company — the company named after him. That’s down from a holding high of 11% before the company IPO in 2011. Investors aren’t happy, and there are good reasons not to be. What does Kors’ move say about the long-term prospects of his brand?

M.
I had to round up, but the letter M is a percentage representation of how much of the Michael Kors Holdings Ltd (NYSE:KORS) brand Kors owns after the sale. He owns the M in “Michael Kors Holdings Ltd (NYSE:KORS).” I wrote about this a few weeks ago, right after the announcement, but I want to go back and look at the impact that Kors’ selling has had on the stock. Since the filing after close on Feb. 19, the company’s stock has fallen 10%. That’s about $1.3 billion in market cap lopped right off the top. And that’s a loss that goes right to shareholders, and which Michael Kors Holdings Ltd (NYSE:KORS) is largely responsible for.

The problem is perception. It’s entirely possible that nothing bad is happening. Google Inc (NASDAQ:GOOG) founders Larry Page and Sergey Brin started dropping a whole bunch of shares back in 2010, but the company remained steady. Here’s an important difference, though — the sell-off left the duo with 48% of the voting rights. That means they were still heavily invested in the company, which displayed a strength of conviction in the brand to other shareholders. Michael Kors Holdings Ltd (NYSE:KORS)’ move isn’t the same thing, because he’s down to such a small part of the company that he founded.