Martha Stewart sells stock in troubled company despite recent insider status

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Martha Stewart’s stock trading is raising eyebrows — again.

The 79-year-old domestic diva — who famously served five months in prison in 2004 and 2005 for lying to the feds about her sale of ImClone shares — sold more than $67,000 worth of stock in Sequential Brands Group in a pair of transactions last month, securities filings show.

The June 4 and June 7 sales — which had Stewart unloading 3,000 and 3,266 shares at prices of $10.74 and $10.82, respectively — were completed just two days before Bloomberg reported that the struggling licensing firm was preparing for a possible bankruptcy filing.

Shares of Sequential — which reportedly has been preparing to file for Chapter 11 as it negotiates a deal to sell the Jessica Simpson clothing brand back to the 40-year-old pop singer — tanked 11 percent on the Bloomberg report. They have steadily deteriorated since. On Thursday, they closed at $8.30 — off 23 percent from where Stewart unloaded them at an average price of $10.78.

There’s no indication that Stewart was aware the Bloomberg report was coming, and troubles at Sequential weren’t brand new at the time. A month earlier on May 4, The Post had reported on the company’s woes amid its Jessica Simpson talks, noting that a deal with lender KKR to install a distressed-debt expert on its board looked like a possible move to prepare for bankruptcy.

On Thursday, a lawyer for Stewart noted that she had left Sequential’s board in late March, as disclosed in a securities filing, and that the company in April and May made announcements about its year-end results, senior officers’ resignations and changes to its credit agreement, among other matters.

“Martha had no advance knowledge of any of these decisions,” the lawyer said in a statement. “In early June, after all of this disclosure and more than two months after she resigned, she made two very small stock trades all publicly disclosed as required by SEC rules.”

The attorney added that Stewart “had no material nonpublic information, her transactions were fully compliant with applicable rules and any speculation to the contrary is simply meritless innuendo.”

Nevertheless, sources close to the company say it’s not a good look, as Stewart had been on the company’s board and privy to its financial turmoil during the crucial months since December, when the company got a complaint from the Securities and Exchange Commission over its accounting practices.

“There have been discussions since last year, going into this year about potential bankruptcy and doing a sale through a bankruptcy,” including at the board level, a source close to the company told The Post. 

Stewart hasn’t sold any more stock and remains Sequential’s second-biggest investor with more than 200,000 shares.

“Although she initially may have believed her trading was proper, she may have stopped trading because someone advised her that the trades could be problematic,” Michael Bachner, a securities attorney with law firm Bachner & Weiner, told The Post.

Stewart had stepped down along with three other directors as part of a deal with lenders to shuffle the board in exchange for a waiver on its punishing trove of debt. But she is the only ex-director known to have sold shares. Former directors Al Gosset, John Dionne and Gary Johnson didn’t respond to requests for comment.

A spokesperson for Sequential declined to comment.

Former executive chairman William Sweedler, meanwhile, remains the largest shareholder and has kept his 13-percent stake intact, according to filings. Ex-director Stewart Leonard Jr., owner of the eponymous New York-area grocery chain, told The Post he has held on to his stake, too.

“I’m not a Wall Street guy or a public stock guru,” Leonard told The Post in declining to comment on Stewart’s trading, about which he said he knows nothing. “At this point, I’m not selling. I’ll hang on and see what happens.”

If Stewart had learned that Sequential was preparing for bankruptcy by virtue of her director’s seat, “it would be improper for her to trade on that information even if that information is the subject of public speculation,” said Bachner, the securities lawyer. “Knowing something as a fact is more significant to an investor than merely speculating that the event will occur — no matter how intelligent that speculation might be.”

But other experts say the situation is not so clear-cut, despite Stewart’s recent director status.

“When she sold the stock, she either had material, nonpublic information or she did not,” securities attorney Pablo Quinones told The Post. “If the material information was a pending bankruptcy and that information was public when she traded, then it would not matter that she previously learned of the information while she was a director.” 

Stewart joined Sequential’s board in 2015 when the firm bought her company, Martha Stewart Living Omnimedia for $353 million. Four years later in 2019, Sequential sold the brand to another licensing firm for $140 million less than what it paid for the company.

At the time, sources told The Post that Stewart’s pay and perks, including $1.8 million in base pay plus a $100,000 expense account, first-class travel, hotel accommodations and hair and makeup services was too rich given the brand’s performance.

In 2004, Stewart began serving five months in prison and five months of house arrest along with two years of probation for obstruction of justice and for lying to federal investigators about why she sold her 3,928 ImClone shares, which saved her only $45,673 in losses. 

ImClone’s shares plummeted 16 percent two days after her trade on news that the Food and Drug Administration did not approve its cancer drug. The company’s chief executive, Sam Waksal, alerted family members about the bad news and they in turn sold over $10 million of ImClone stock before the FDA news came out. 

Waksal and Stewart at the time had the same broker, who tipped off Stewart. 

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