Action Performance

(ACTN)

, which sells model cars and other racing merchandise to

Nascar

enthusiasts, found itself in need of spin control last week after a registration statement and other insider transactions sparked a selloff in the stock.

At issue was a registration statement Phoenix-based Action filed with the

Securities and Exchange Commission

listing some high-profile names as "selling shareholders." Seven-time

Winston Cup

champion Dale Earnhardt and his wife, Teresa, registered to sell all of their 200,464 shares beneficially owned. Three-time Winston Cup winner Jeff Gordon registered all of his 54,978 shares. Earnhardt and Gordon received stakes in Action Performance through private placements and both have exclusive licensing deals with the company. Also registering all of its 57,500 beneficial shares is

Hasbro

(HAS) - Get Report

, which has a licensing agreement with Action Performance. All in all, some 516,494 shares, or 3.2% of the company's 16.8 million diluted shares outstanding, were registered for sale.

The news sent the stock, which had recently hit a 52-week high of 48 1/4, into a tailspin. It traded as low as 31, and closed Thursday at 32 3/8.

Executives and affiliates of companies often sell stock routinely and without much fanfare. So why the fuss with Action Performance?

The stock has been the subject of a perennial tug of war between longs, who say Nascar is the best pastime since baseball, and shorts, who question the company's ability to maintain its stunning growth record. Over the past five years, Action Performance has seen compounded earnings soar 115% annually. But skeptics warn of increased competition from

Mattel

(MAT) - Get Report

, which has been aggressive with its

Formula One

business. Action Performance has pegged Formula One for future growth. Last August it took an 80% stake in

MiniChamps

, a European marketer of model cars and collectibles with the license to several Formula One names, including

Ferrari

. But Ferrari then announced that it will sign with Mattel after its license with MiniChamps expires this year.

So any hint that insiders or others close to the company believe this is a good time to take profits caused investors some discomfort.

Investors were so spooked by the registration statement that Chris Hansen, an analyst with

NationsBanc Montgomery Securities

, issued an internal memo, obtained by

TheStreet.com

, to his firm's sales force on March 3 that read:

Some of the stock's recent decline may be attributable to investors' misinterpretation of an amended S-3 filing today as we have got many questions on the subject ... It gives the appearance that Jeff Gordon, Earnhardt, Hasbro and others are registering their shares for sale, which has sparked unwarranted concern.

In an interview, Hansen said the registration statement was merely an update to include shares granted through two acquisitions. His firm has performed underwriting for Action Performance.

Christopher Besing, Action's chief financial officer, says the whole affair is much ado about nothing. "The SEC language is 'selling shareholders,'" Besing says. "That doesn't mean they are selling. They're simply registering stock. They could sell if they wanted to, but they're not necessarily going to sell."

John Heine, an SEC spokesman, says that, because of the cost and effort that goes into preparing a filing, "people don't register to pass the time of day. It's not like a handgun. You don't have to register

stock to carry it around."

A footnote to Action Performance's filing explains it this way: "Each of the selling shareholders is assumed to be selling all of the shares of common stock registered for sale and will own no shares of common stock after the offering," except for five individuals who are only registering a portion of their holdings for sale.

Heine says that there are cases where companies have registered stock that's never been sold for various reasons. In those instances, he says, the registration statement is eventually withdrawn or canceled.

A comparison with a similar registration statement filed in February 1998 shows the positions of Earnhardt, his business manager Donald Hawk and others decreased. For instance, the 1998 registration statement lists Earnhardt and his wife as beneficially owning 258,950 shares, or 58,486 more than in the new statement. Likewise, Hawk beneficially owned 5,414 last year, compared with 3,000 shares this year.

Hawk declines to elaborate on his position, saying the information is confidential. "It doesn't mean they were sold," he says, then adds: "I wouldn't have stock if I wasn't periodically going to sell it."

Finally: "We're not a seller of the stock, we're a buyer," he says.

Paul Elliott, an analyst with insider trading tracker

CDA/Investnet

, says it's not the size of a sale that matters, but the percent of the holdings divested. For instance, Fred Wagenahls, Action Performance's chairman and chief executive, recently registered to sell 240,000 shares. Since Wagenahls files to sell this amount regularly and owns more than 2 million shares, the transaction is less important, Elliott says.

Of note, Elliott says, is CFO Besing's sale of 23,528 shares, or roughly half of his actionable position. And director Robert Manschot reduced his position by 40%, while John Bickford, vice president of strategic alliances, trimmed his stake by 60%.

Besing says his stock sale was the result of options exercised 18 months ago and held in his account for tax purposes. (According to new tax guidelines, investors who hold a security for more than 12 months are taxed just 20% on capital gains, rather than the regular tax rate, between 28% and 39% depending on income level.) He adds that he still owns 75,000 options.

"Monitoring insider selling is important," concedes Hansen, the analyst. "But it's just one factor that goes into the analysis of a company." He says the stock is undervalued trading at 16 times the

First Call

consensus estimate of $2.03 a share for the year ending September 1999, a 36% increase over fiscal 1998.

But if insiders stay active, Action Performance may find its spin control spinning its wheels.