Shares of transport company XPO Logistics Inc. and logistics firm GXO Logistics Inc., which XPO spun off in August into a publicly traded entity, fell sharply on Friday after public filings the day before disclosed that Brad Jacobs, XPO’s founder and the chair of both companies, sold 3.2 million shares in each.
The sales account for about 20% of Jacobs’ holdings in each company. He still owns around 12.3 million shares of each, according to Securities and Exchange Commission filings. This translates into a 10% ownership of both companies on a pro forma basis, according to estimates by Deutsche Bank.
XPO shares (NYSE: XPO) fell 4.55% in Friday trading to close at $72.41 per share. GXO shares (NYSE: GXO) dropped 7.6% to $85.78 per share. Both are well off their 52-week highs.
XPO shares are down more than 10% over the past 3 months, while GXO shares are up 3.71% over that time after surging in the first 30-45 days of trading after going public on Aug. 2.
Jacobs sold his XPO shares at an average price of $74.21 a share, and his GXO position at an average price of $86.40 a share, according to the filings. An XPO spokesman said late Friday that Jacobs’ stock sales were triggered under a previously executed plan that was put in place after the GXO spin-off.
Amit Mehrotra, Deutsche Bank’s lead transport analyst, said in a Friday note that he has no concerns about Jacobs shedding part of his position in both companies ahead of what Mehrotra believes will be Jacobs’ ultimate departure from XPO, which he founded 10 years ago and which has been one of the New York Stock Exchange’s top performers since then.
The sell-off in both shares represents a compelling buying opportunity in that both companies are fundamentally sound, Mehortra said. The analyst said that GXO is winning large and lucrative contracts, and that XPO is fixing what has been an underperforming post-spin LTL business and is progressing in its plan to deleverage its balance sheet, one of Jacobs’ key priorities.
Mehrotra added that previous stock sales by Jacobs have coincided with periods of positive momentum for XPO and for what once was a transportation and logistics behemoth. XPO’s portfolio includes its LTL, truck brokerage, intermodal and last-mile businesses.
Still, the negative market reaction may underscore investor frustration that has been building for several months, Mehrotra said. In its first reporting quarter since the spin-off, XPO posted mixed results as margin erosion in the LTL business offset stellar results in truck brokerage. Shares sold off as investors, accustomed to bumper results from Jacobs and watching XPO rivals like Old Dominion Freight Line Inc. and Saia Inc. thrive in a strong LTL macro environment, made their dissatisfaction known.
News of a significant share sale by the founder, planned or not, won’t relieve investor angst, at least in the near-term. “Investors don’t like surprises, and the volatility in XPO and GXO shares from events like today has implications for structural valuation,” Mehrotra wrote.