Blend chairman sells off 1.8 million shares of company stock

Blend Labs co-founder and Chairman Nima Ghamsari has sold 1.8 million of his shares in the company in order to reduce the amount outstanding of a personal loan secured by those stock holdings.

“In light of the declines in Blend’s stock price, I have sold some of my holdings in Blend shares and used the proceeds to reduce the outstanding amount under the loan, as required under the loan documentation,” a blog post by Ghamsari on the company website said. “I will make additional sales of shares from time to time to further pay down the loan.”

The structure of Blend’s initial public offering created a class B common stock that only Ghamsari holds, with supervoting powers of 40 votes per share.

Blend’s high water mark as a public company was the day of the IPO, July 16, 2021, when it opened at $20 per share and topped out at $21.04 before closing at $20.90.

Ghamsari converted 970,874 of the class B shares into an equal publicly traded class A shares on Dec. 8 and sold those at a weighted average price of $1.11 per share, a Securities and Exchange Commission filing stated. Blend’s trading range on the day was between $1.07 and $1.22 per share.

The next day, another 175,772 shares were converted and sold at a weighted average price of $1.2437 per share. It traded that day between $1.12 and $1.32 per share.

Finally on Dec. 12, Ghamsari converted 776,092 shares and sold those at a weighted average price of $1.2581 per share. It traded between $1.23 and $1.32 and closed at $1.25 per share.

After the sales, Ghamsari still owns over 10.2 million Class B shares. That equates to 64% voting power at Blend.

“While it is unclear how much additional pay down of this personal loan is required, or the timing, Mr. Ghamsari’s comments suggest that the sale of additional shares is likely, which could be a technical overhang on the stock,” a research note from Ryan Tomasello, an analyst from Keefe, Bruyette & Woods, said. “The announcement may also raise investor concerns over additional potential knock-on impacts from the material decline in Blend’s share price.”

The lower price could then drive higher share issuance from restricted stock units and stock options. These are granted on a fixed dollar value and a variable number of shares that floats on Blend’s price.

“On the positive side, [the] conversion of class B shares to class A shares helps reduce the corporate governance overhang of Mr. Ghamsari’s super-voting rights,” Tomasello said.

Blend lost $132.7 million in the third quarter, better than the second quarter loss of $477.2 million. For the third quarter of 2021, it lost $76.3 million.

“It’s important to know that while this event is personally disappointing, I’ve never been more committed to Blend and what we are accomplishing,” Ghamsari said in the blog post. “I also want to make clear that this does not change or impact our priorities as a business, and we remain laser focused on serving our customers.”