Should you buy the Dicker Data dip?
Dicker Data shares tumbled to 4-month lows after its founder offloaded 10.2% of the company.
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Mentioned
KEY POINTS
- Dicker Data shares plummeted 12.5% as co-founder David Dicker sold 18.3 million shares at a 9.5% discount due to a divorce settlement
- Despite the selloff, the company remains optimistic about a strong uptrend driven by PC demand and enterprise investments
- Previous incremental sales by Dicker had minimal impact, notably a $42.2 million sale coinciding with a 23.4% selloff in 2021
Dicker Data (ASX: DDR) shares fell as much as 12.5% on Wednesday after its co-founder, David Dicker, sold approximately 18.3 million shares at a substantial discount.
The sale was undertaken at a price of $10.90 per share or a 9.5% discount to its last close and represents approximately 10.2% of the company's issued capital.
"The sale of shares is due to a recent divorce settlement and subsequent restructuring of David Dicker’s portfolio. He has entered into a 6-month escrow on his remaining shareholding," the company said in a statement.
Dicker Data shares have bounced off session lows, down 10.2% to $10.82 at noon. The stock is on track to have its worst session since 8 February 2023 – Where the stock sold off 10.7% after reporting a disappointing set of preliminary FY22 results.
The Story So Far
Shares in Dicker Data have been in a strong uptrend since late August, up as much as 50% thanks to favourable tailwinds such as:
Strong demand in software, network and storage segments
Growing expectations that PC demand will bottom in the December quarter 2023 and return to growth in 2024 (PC sales fell 14% year-on-year in FY23)
A new refresh cycle driven by the end of support for Windows 10
Enterprise customers investing into AI
Dicker Data reported its full-year result on 27 February, where gross sales rose 5.6% to $3.28 billion and net profit increased 12.5% to $82.1 million. Most of its key financial results were in-line with analyst expectations. Some of the key takeaways from its earnings call Q&A include:
PC refresh cycle expected to drive stronger growth into next year, with Q1 and Q2 likely to be flat and strong growth anticipated in Q3 and Q4
Inventory digestion and reduced demand impacting enterprise networking business, but new vendor additions are performing well
Q4 sales slightly down due to slower PC and enterprise networking invoicing; similar trend expected in Q1 2024
Previous Sales
David Dicker and his ex-wife Fiona Brown founded Dicker Data in 1978 and held a respective 34% and 33% of the company before today's trade.
The founder has logged a number of incremental sales over the past few years, yet the majority of these have had a minimal impact on the company's share price.
Date | Director | Type | Amount | Price | Value |
|---|---|---|---|---|---|
18/12/23 | Sell | 58,165 | $12.10 | -$703,674 | |
15/12/23 | Sell | 82,171 | $12.18 | -$1,001,212 | |
14/12/23 | Sell | 58,624 | $12.15 | -$712,094 | |
13/12/23 | Sell | 70,837 | $12.14 | -$860,117 | |
12/12/23 | Sell | 79,162 | $12.15 | -$961,865 | |
31/05/23 | Sell | 1,000,000 | $8.01 | -$8,010,000 | |
27/08/21 | Sell | 2,740,000 | $15.40 | -$42,196,000 | |
1/04/20 | Buy | 50,000 | $4.76 | $238,165 | |
23/03/20 | Buy | 50,000 | $4.00 | $199,820 | |
19/03/20 | Buy | 50,000 | $4.78 | $239,185 | |
18/03/20 | Buy | 24,940 | $4.99 | $124,383 | |
17/03/20 | Buy | 11,565 | $5.19 | $59,999 |
The most notable transaction would have been the $42.2 million sale on 27 August 2021. The sell down coincided with Dicker Data's interim result announcement the previous day, where the stock hit an all-time high of $16.60.
The selldown triggered a sharp 23.4% sell off over the next three sessions. Dicker provided a statement on 31 August 2021 saying:
"This sale seems to have provoked a loss of confidence in DDR which is entirely unwarranted. It seems that people have read things into this sale that are just not there. This sale does not mean, in any way, that I am reducing my role or involvement with Dicker Data."
He said the proceeds of the sale will be used to fund three different areas:
The final capital spending on Rodin Cars (high-performance supercars)
Purchase of a used Bombardier Global XRS (a large cabin, long-range business jet)
A return to trading the US Equity Markets
The stock managed to recover most of the selloff by late October 2021. All-in-all, the selldown prompted a lot of short-term volatility but managed to find its footing 2-3 months later.
Dicker Data share price chart late 2021 to 2022 (Source: TradingView)
Dicker Data currently has a consensus target price of $11.99, according to Market Index consensus data.
