After a week of shareholder backlash and media scrutiny, Sirtex Medical Limited (ASX:SRX) CEO, Gilman Wong, has taken temporary leave as the company investigates his recent share selling.
After forecasting "double digit" dose sales for its 2017 financial year on October 25, Sirtex CEO Gilman Wong took to the market to sell shares in his own company on October 27. All up he sold just under 75,000 shares, worth around $2.13 million. According to his statement to the ASX, Mr Wong still holds 200,000 shares with performance rights on another 118,930.
On November 7, the company issued a statement providing a reason for Mr Wong's share sale. In the statement Mr Wong said, "To clarify, the reason for the sale of shares was to cover the tax incurred in relation to the recently vested tranche of rights."
Then, on December 9, the company issued a trading update forecasting 5% to 11% growth in full year dose sales and a fall in operating profit over the prior year.
On December 15, the ASX sent Sirtex a 'please explain' letter, following a "tip-off" in order to better understand the change in growth forecasts. Sirtex told the ASX, "As you are aware, SRX's business has a very short sales cycle, measured in days. As a result, there is no transparency on dose sales beyond a very short window."
CEO to take leave
Throughout this saga, the company was the subject of a significant amount of shareholder and media scrutiny, with its share price falling 38% since December 8. Indeed, shareholders are left questioning the timing of the CEO's share sale. Was it simply luck or something else?
On Friday night, the company announced it has engaged legal advisors Watson Mangioni to investigate the share trading of Mr Wong.
"Mr Wong denies any wrong-doing concerning his share trading, but, in the interests of due process, and in the best interests of the Company, he has volunteered to take temporary leave across the New Year period, until the investigation has been completed."
"The Sirtex Board wishes to emphasise that its decision to commission this investigation has been made solely for the purpose of ensuring that the concerns raised with the Company are appropriately investigated, and in no way implies any wrongdoing on the part of Mr Wong."
Foolish takeaway
As my colleague, Tom Richardson, wrote last week, the market was shocked by Sirtex's announcement on December 9. It seems investors were expecting the good times to continue.
Given the uncertainty surrounding the business' growth outlook and management, I suggest investors steer clear of Sirtex shares for the time being.
