Shares of Netflix (NFLX) are trading down 3% in after hours after the company announced the unexpected departure of its CFO Barry McCarthy, who left to "pursue broader executive opportunities." As shown in the chart below, Mr. McCarthy has been a big seller of the company's stock leading up to the announcement. So far this year, he has sold more than $52 million worth of his holdings on the open market.
Without even getting into a debate over the company's valuation, many traders are looking at his record of sales coupled with the sudden resignation with a skeptic's view, assuming that something must be wrong inside the company. While that certainly could be the case, if there were any irregularities with the company's finances, would the CFO be so foolish as to sell his holdings right before he quits? The more likely explanation would be that he sold his holdings because he was leaving.
Even as the reasons for Mr. McCarthy's departure are most likely benign, the timing is ironic. Less than a month ago, NFLX CEO Reed Hastings was named Fortune's Businessperson of the Year, and in an interview for the article he cited the fact that "the entire executive team has been with the company more than a decade" as one of the company's keys to success. So much for that argument.