Some people like to refer to Billionaire Edward Lampert as Fast Eddie. He has been getting lots of accolades lately for his very timely purchases of Sears Holdings (SHLD), but that is miniscule compared to his very profitable exit strategy for his holdings in Autozone (AZO). Over the last 6 months he has managed to sell 4.5 million shares of stock at a staggering value of 1.5 BILLION DOLLARS, making a cool $750,000,000+ on his investment
You would expect that any insider who sells over 15% of the float, during any 6 month period, would negatively affect the price of the stock. However, while Eddie was busy selling shares, the price of AZO's stock went up an astronomical 21%.
How does he do it? I can only surmise that being a former board member of Autozone and having his firm appoint board members to AZO has helped quite a bit. At the time that Eddie Lampert was selling his stock, the board of AZO authorized the company to buyback up to $750 million shares of AZO's stock in Sept of 2011 and another $750 million in March of 2012.
It is a little disconcerting to see that all the officers and board members who authorized the aggressive buybacks are selling shares as well. Over the last six months, officers and directors have sold over 150K shares for around 60 million dollars. Many exercised options with strikes below $100 and sold for $300+ ... a nice payday indeed. All these sales left all the officers and directors holding less than 400k shares and Eddie Lampert with just 1.5 million shares.
It seems like everything is okay at AZO. I just have to wonder if all these insiders know something that the average investor in AZO doesn't yet. Maybe the balance sheet of autozone has something to do with it.
I have never seen a company with a market cap of $14.5 billion have a negative book value of $1.5 billion and where cash + receivables is less than 10% of payables, but I must admit the lack of liquidity is working for AZO shareholders... at least in the short run.
Disclosure: I am short AZO.
Additional disclosure: I am short AZO using put options as Shorting AZO has proved to be too risky of an endevour