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Fevertree goes flat as founder cashes in £73mln worth of shares

Fevertree shares quickly rediscovered their fizz though
Fevertree tonic water
The shares sold represent around 3.9% of the issued share capital

Shares in Fevertree Drinks PLC (LON:FEVR) briefly lost some of their fizz last week after one of its founders cashed in a chunk of his shares.

On Thursday, non-executive deputy chairman Charles Rolls sold off 4.5mln shares in the tonic maker worth almost £75mln due to “significant institutional demand”.

The shares were sold to those institutional investors at £16.25 apiece – a decent discount to yesterday’s closing price of £17.48.

Investors always get a bit twitchy when a director sells off some of their own shares though, for fear that business may have reached its peak.

This, combined with the effect of a flood of shares hitting the market and the fact they were sold to institutions at a discount, had caused the stock to shed almost 5%.

Fevertree soon regained its fizz though and finished the week 4% up at £17.25 though, as the big institutions gobbled up the newly-available stock and investors’ calm returned. 

Why has he sold?

The official reason, as noted above, is that there was so much demand from institutional investors and not enough shares in the free float to satisfy this interest.

While there’s no suggestion that that isn’t the case, there are likely a couple of other reasons behind the sale as well.

Rolls essentially started his road to retirement earlier this month following the company’s annual general meeting, after which he moved from executive deputy chairman to non-executive deputy chairman.

As his co-founder Tim Warrillow said in the full-year results announcement back in March, Rolls still sits on the board and is always available for “support and advice”, but his day-to-day involvement has lessened and he now focuses more on long-term strategy.

The two founded the company almost 15 years ago and when Fevertree listed at the end of 2014 it was valued at just £154mln.

The following two-and-a-half years have been pretty hectic, with Rolls and Warrillow growing Fevertree into a £2bn company, rivalling industry stalwart Britvic Plc (LON:BVIC) in terms of market value.

With the two not really having taken much money out of the company so far, Rolls is entitled to enjoy the fruits of his labour at some point. That point just happens to be now.

Is this a sign that the rise is over?

As when any director sells a chunk of their holding in their own company, investors always fret that he or she knows something they don’t and that the business has reached its peak.

That’s unlikely to be the case in this instance though.

Rolls is still the company’s largest shareholder with an 11.2% interest in the premium drinks mixer specialist.

That’s worth more than £200mln based on the current share price. If he truly thought Fevertree was headed down, there’s good chance he would’ve cashed in a lot more of his shares.

It’s also important to bear in mind that his co-founder, who is also one of the firm’s largest shareholders, hasn’t cashed in any of stock which he probably would’ve done if he thought it was all doom and gloom from here on.

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