The Life360 Inc (ASX: 360) share price is starting the week deep in the red.
At the time of writing, the ASX tech stock is down almost 6% to $21.41.
Though, it is worth noting that the location technology company's shares remain up approximately 170% since this time last year despite today's weakness.
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Why is this ASX tech stock sinking?
Investors have been rushing to the exits after the company revealed that its co-founder and CEO, Chris Hulls, has sold a large number of shares.
Insider selling rarely goes down well with the market. The idea is that if an insider is selling shares, they may believe they have peaked. After all, if they thought they were heading higher, they would hold tightly to them.
Insider selling
According to the release, Hulls has executed a partial disposition of his holdings amounting to 863,903 shares, or 1.2% of total outstanding shares in the company.
It remains unclear just how much Hulls received for the shares. Though, a SEC Filing on Friday shows that 556,569 Nasdaq listed shares were sold for an average of US$41.02 per share. This is the equivalent of approximately US$22.8 million or A$35 million.
Should you be concerned?
While insider selling can be concerning, it is worth noting that there was a reason for the sale.
In addition, Hulls still has a considerable stake in the company and therefore plenty of skin in the game. The release notes that the CEO will continue to beneficially own approximately 3.8% of the total outstanding shares in the ASX tech stock.
Commenting on the sale, Hulls revealed that it was driven by a wish to diversify his holdings. He said:
I have previously indicated my desire to diversify my financial holdings – as a founder, I have been with the Company for 17 years and I have a significant majority of my wealth associated with Life360 – and these transactions reflect that plan.
The co-founder and CEO advised that he remains excited to continue driving the company's growth. He adds:
I have recently returned from an extended break more excited than ever about the opportunities ahead for Life360, and with a renewed enthusiasm to lead the next chapter in the Company's vision.
At the same time I decided to activate my planned diversification, and these transactions will enable me to secure my family's future as well as creating a foundation to undertake philanthropic projects in my local community.
Life360's leader will be donating a third of its securities to charity. Hulls explains:
I am donating over a third of my securities immediately to a private foundation and donor advised fund. I will still have close to 75% of my net worth in Life360 equity and have committed to not undertake certain additional sales in the next 12 months — this includes terminating the Rule 10b5- 1 plan that I had set up and was disclosed in our most recent Form 10-Q.
