Insider Weekends: Insiders Of Driven Brands Driven To Buy More

Welcome to edition 552 of Insider Weekends. Insider buying decreased significantly last week with insiders purchasing $5.43 million of stock compared to $37.41 million in the week prior. Selling increased with insiders selling $1.69 billion of stock last week compared to $1.25 billion in the week prior.

Sell/Buy Ratio: The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by total insider purchases that week. The adjusted ratio for last week increased significantly to 310.71. In other words, insiders sold almost 311 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 33.53.

Note: As mentioned in the first post in this series, certain industries have their preferred metrics such as same store sales for retailers, funds from operations (FFO) for REITs and revenue per available room (RevPAR) for hotels that provide a better basis for comparison than simple valuation metrics. However metrics like Price/Earnings, Price/Sales and Enterprise Value/EBITDA included below should provide a good starting point for analyzing the majority of stocks.

Notable Insider Buys:

1. Driven Brands Holdings Inc. (DRVN): $29.79

Shares of this automotive repair and maintenance services provider were acquired by 2 insiders:

  • EVP & President, Car Wash Gabriel C. Mendoza acquired 30,000 shares, paying $29.79 per share for a total amount of $893,630. Mr. Mendoza increased his stake by 12.36% to 272,703 shares with this purchase.
  • President, Platform Services Kyle L. Marshall acquired 2,220 shares, paying $26.98 per share for a total amount of $59,896. Mr. Marshall increased his stake by 10.41% to 23,546 shares with this purchase.

If every time you happened to drive past a car wash business or an auto maintenance shop and had the burning desire to own a boring but dependable low-growth business, then your wishes may have come true with the IPO of Driven Brands Holdings earlier this month for $22 per share. While I jest about the burning desire part, Driven Brands has been consolidating a fragmented industry through acquisitions and now operates or franchises a little over 4,000 locations across the U.S. and 14 countries. Driven Brands picked up 900 locations through its 2020 acquisition of car wash company ICWG. The IPO was originally priced at a range of $17 to $20 per share before being bumped up to $22 per share but the number of shares offered were reduced.

In this new world that allows companies of all sizes to easily go public by merging with a Special Purpose Acquisition Vehicle (SPAC), it is interesting to see that Driven Brands chose the regular IPO route with Morgan Stanley, Bank of America and Goldman Sachs as lead underwriters and J.P. Morgan and Barclays playing second fiddle. We added 68 SPAC IPOs to our SPAC list just in the first three weeks of this year.

What is stranger is that insiders of the company are buying stock at prices well above the IPO price. Insiders often tend to sell shares in an IPO or after the six month lock-up expiration and we don’t see much buying in new IPOs. Maybe they are enthusiastic about the company’s growth and large addressable market. Beyond the 37% revenue CAGR from 2015 to 2019, same store sales also increased 5% in each of 2018 and 2019. The average same store sales growth over the last 12 years (excluding 2020) was 4%. The company does not include sales at its franchisees when calculating revenue but it is included in “system-wide sales”.  The company figures it has a very large total addressable market (TAM) to tap into with just 1% market share in auto maintenance and car wash and 4% market share in the paint, collision and glass segment.

Driven Brands Stores, Revenue and System-Wide Sales

Driven Brands Stores, Revenue and System-Wide Sales (source: EDGAR Amended S-1 Filing)

EBITDA for 2020 is expected to come in around $160 million compare to $93.65 in 2019. Adjusted EBITDA after including their ICWG car wash acquisition is expected to be $266.5 million at the mid-point of the range the company provided.

As one would expect from a company growing through acquisitions, there is a lot of debt with the company estimating $2.01 in net debt on the balance sheet by the end of 2020. The company expected to use most of the money raised from the IPO (between $700 and $800 million) to pay down debt and so net debt post-IPO is likely to range between $1.2 billion and $1.3 billion. This would put the EV/EBITDA around 20 assuming 132 million shares outstanding after the IPO and $1.2 billion in net debt. The other challenge for the company is the increased adoption of EVs, which generally require less maintenance and specialized components.

You can view the list of recent insider transactions for Driven Brands Holdings Inc. here.

P/E: N/A Forward P/E: N/A Industry P/E: N/A
P/S: 6.15 Price/Book: N/A EV/EBITDA: N/A
Market Cap: $4.91B Avg. Daily Volume: 2,663,825 52 Week Range: $25.3 – $32.95

2. Adverum Biotechnologies, Inc. (ADVM): $13.39

Shares of this biotech company were acquired by 2 insiders:

  • Director Patrick Machado acquired 10,000 shares, paying $11.52 per share for a total amount of $115,174. Mr. Machado increased his stake by 14.67% to 78,182 shares with this purchase.
  • CEO and Director Laurent Fischer acquired 8,600 shares, paying $11.53 per share for a total amount of $99,191. Mr. Fischer increased his stake by 111.80% to 16,292 shares with this purchase.

You can view the list of recent insider transactions for Adverum Biotechnologies, Inc. here.

P/E: N/A Forward P/E: -9.63 Industry P/E: N/A
P/S: N/A Price/Book: 2.81 EV/EBITDA: -9.02
Market Cap: $1.31B Avg. Daily Volume: 1,021,341 52 Week Range: $7.36 – $26.98

3. Vector Group Ltd. (VGR): $12.16

EVP/COO Richard Lampen acquired 15,000 shares of this tobacco company, paying $12.10 per share for a total amount of $181,500. Mr. Lampen increased his stake by 3.50% to 443,986 shares with this purchase.

You can view the list of recent insider transactions for Vector Group Ltd. here.

P/E: 26.78 Forward P/E: 14.31 Industry P/E: 16.89
P/S: 1.3 Price/Book: N/A EV/EBITDA: 9.98
Market Cap: $1.86B Avg. Daily Volume: 722,364 52 Week Range: $7.92 – $13.86

4. HEICO Corporation (HEI.A): $113.65

COB & CEO Laurans A. Mendelson acquired 1,054 shares of this aerospace, defense, and electronic related products company, paying $118.63 per share for a total amount of $125,036.

You can view the list of recent insider transactions for HEICO Corporation here.

P/E: 49.63 Forward P/E: 40.59 Industry P/E: 78.44
P/S: 0.58 Price/Book: 1.59 EV/EBITDA: 31.3
Market Cap: $331.79M Avg. Daily Volume: 142,553 52 Week Range: $7.48 – $12.24

5. Landec Corporation (LNDC): $11.315

Chief Executive Officer Albert D. Bolles acquired 10,000 shares of this packaged foods company, paying $10.98 per share for a total amount of $109,800. Mr. Bolles increased his stake by 38.24% to 36,152 shares with this purchase.

You can view the list of recent insider transactions for Landec Corporation here.

P/E: N/A Forward P/E: 59.55 Industry P/E: 24.39
P/S: 0.58 Price/Book: 1.59 EV/EBITDA: 31.3
Market Cap: $331.79M Avg. Daily Volume: 142,553 52 Week Range: $7.48 – $12.24

You can view the full list of purchases from this Insider Buying page.

Notable Insider Sales:

1. Lemonade, Inc. (LMND): $153.49

Shares of this insurance company were sold by 5 insiders:

  • Director Joel E. Cutler sold 515,572 shares for $159.43, generating $82.19 million from the sale. These shares were sold indirectly by General Catalyst Group VIII, L.P.
  • Co-Founder & CEO Daniel A. Schreiber sold 300,000 shares for $159.43, generating $47.83 million from the sale.
  • Director George Thompson Hutton sold 100,000 shares for $159.43, generating $15.94 million from the sale.
  • Chief Insurance Officer John Sheldon Peters sold 65,500 shares for $150.81, generating $9.88 million from the sale.
  • Chief Financial Officer Timothy E. Bixby sold 50,000 shares for $159.43, generating $7.97 million from the sale.

You can view the list of recent insider transactions for Lemonade, Inc. here.

P/E: N/A Forward P/E: N/A Industry P/E: 17.12
P/S: 89.18 Price/Book: N/A EV/EBITDA: -65.84
Market Cap: $8.69B Avg. Daily Volume: 3,472,979 52 Week Range: $44.11 – $188.3

2. Guardant Health, Inc. (GH): $159.92

Chief Executive Officer Helmy Eltoukhy sold 639,114 shares of this precision oncology company for $161.36, generating $103.13 million from the sale. 148,245 of these shares were sold indirectly by Eltoukhy Investments, L.P.

You can view the list of recent insider transactions for Guardant Health, Inc. here.

P/E: N/A Forward P/E: -98.72 Industry P/E: 22.2
P/S: 58.93 Price/Book: 14.63 EV/EBITDA: -86.44
Market Cap: $15.99B Avg. Daily Volume: 1,035,651 52 Week Range: $55.9 – $168.52

3. Facebook, Inc. (FB): $274.5

Shares of Facebook were sold by 2 insiders:

  • COB and CEO Mark Zuckerberg sold 172,910 shares for $256.71, generating $44.39 million from the sale. These shares were sold indirectly by various entities.
  • VP and General Counsel Jennifer Newstead sold 310 shares for $260.58, generating $80,781 from the sale.

You can view the list of recent insider transactions for Facebook, Inc. here.

P/E: 31.27 Forward P/E: 26.14 Industry P/E: 41.78
P/S: 9.9 Price/Book: 6.65 EV/EBITDA: 24.4
Market Cap: $781.86B Avg. Daily Volume: 19,182,056 52 Week Range: $137.1 – $304.67

4. Wayfair Inc. (W): $299.94

Shares of this e-commerce business were sold by 5 insiders:

  • Co-Founder Steven Conine sold 35,920 shares for $349.81, generating $12.57 million from the sale.
  • Chief Executive Officer Niraj Shah sold 35,902 shares for $349.81, generating $12.56 million from the sale.
  • Chief Financial Officer Michael D. Fleisher sold 7,034 shares for $303.05, generating $2.13 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • Chief Merchandising Officer Steve Oblak sold 1,948 shares for $302.91, generating $590,076 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • Chief Product/Marketing Edmond Macri sold 1,346 shares for $301.77, generating $406,185 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.

You can view the list of recent insider transactions for Wayfair Inc. here.

P/E: N/A Forward P/E: 122.42 Industry P/E: 81.00
P/S: 2.37 Price/Book: N/A EV/EBITDA: 216.75
Market Cap: $30.88B Avg. Daily Volume: 2,304,975 52 Week Range: $21.7 – $369

5. Chewy, Inc. (CHWY): $105.08

Shares of this pet food and treats company were sold by 2 insiders:

  • Chief Executive Officer Sumit Singh sold 127,820 shares for $110.00, generating $14.06 million from the sale.
  • General Counsel Susan Helfrick sold 11,422 shares for $104.89, generating $1.19 million from the sale.

You can view the list of recent insider transactions for Chewy, Inc. here.

P/E: N/A Forward P/E: -210.16 Industry P/E: 81.00
P/S: 6.71 Price/Book: N/A EV/EBITDA: -295.44
Market Cap: $43.36B Avg. Daily Volume: 4,278,632 52 Week Range: $20.62 – $115.274

You can view the full list of sales from this Insider Sales page.

The list of all insider purchases and sales by management people is only available to InsideArbitrage Premium members.

Disclaimer: Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.

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