Founder Sells Stock as Monster Rebuilds

Tables: Buyers | Sellers

MONSTER WORLDWIDE'S FOUNDER SCARED UP some profits as the New York-based online-recruitment company launches a serious restructuring program.

Andrew J. McKelvey, who stepped down as the company's chairman and chief executive officer last October, has sold 1.27 million shares for $48.6 million on the open market since Friday, according to Securities and Exchange Commission filings.

Per-share prices for these transactions range from $37.10 to $40. That is a significant discount to McKelvey's previous sales. In mid-May, he sold one million Monster shares for $48.9 million when the stock traded in the $48-$49 range.

Although McKelvey has cut his strings with the company, he still files as an insider because of his large stake. He continues to control more than 9.2 million shares, which include 4.76 million class B shares that McKelvey exclusively owns. The class B shares are convertible to the commonly traded stock on a one-to-one basis but carry 10 times the voting power.

As of the April 2007 proxy statement, McKelvey's shares gave him a voting stake of 31.5%.

McKelvey founded Telephone Marketing Programs as a directory advertising company in 1967 and entered into recruitment advertising in 1993. TMP bought Monster Board and Online Career Center in 1995 and its units merged in 1999. The company changed its name to Monster Worldwide in 2003.

Blackfin Capital, the hedge-fund-management firm co-founded by McKelvey and Bradford Peters in 1998, and Monster both declined to comment on the sales.

Although McKelvey is no longer involved in the company's operations, Ben Silverman, director of research at InsiderScore.com, says that "he understands the cycle the company goes through and due to the fact that he is so familiar with the business, the sales are a bearish signal."

The mitigating factor is that McKelvey is 72 years old and is likely seeking to diversify his portfolio due to the similar dollar amounts he sold during both periods this year, notes Silverman. However, that pace has accelerated as the stock fell.

In the past, McKelvey tended to sell shares in $700,000 tranches under trading plans, says Silverman.

After peaking at a one-year high of $54.79 on Feb. 20, Monster shares have tumbled 32% since then, amid ongoing stock-option backdating issues and Monday's disappointing second-quarter report. Earnings were hurt by severance payments made to former executives and expenses related to a stock-option investigation.

An amended shareholder complaint last month specifically targeted McKelvey's involvement in the backdating scandal but his attorney is looking to dismiss charges. McKelvey had resigned in October rather than be involved in the company's internal backdating probe.

Monster also announced a restructuring program to slash costs by cutting 800 jobs, or 15% of its workforce, and by improving efficiencies. The company's move to form newspaper partnerships has not paid off amid stiffer competition from deep-pocketed competitors such as Yahoo, Google and CareerBuilder.com. Strong international growth helped offset weaker-than-expected career growth in North America.

Analysts appear to be optimistic about the company's long-term prospects and some still identify it as a takeover target.

ThinkEquity Partners analyst Terrence Babe wrote Tuesday that this restructuring program "could lead to improved profitability and revenue growth" under a new management team. And despite the company's problems, Deutsche Bank Securities analyst Jeetil Patel wrote that Monster is the best positioned in the online-recruitment service space in the long term thanks to its "prominent brand name and diversification."

Both analysts maintain a Buy rating while Babe has a $51 price target and Patel has a $48 price target.

However, the recent earnings disappointment could create a turnover in institutional ownership that has been fairly steady over the past year, says Joshua Hong, director of research at OwnershipAnalyzer.com.

As of March 31, 267 firms held 118 million shares -- roughly in line with a year ago but slightly higher than the 115.1 million shares held by 270 firms at the end of 2006.