Brainchip Holdings Ltd (ASX: BRN) shares are having a day to forget on Wednesday.

In afternoon trade, the struggling semiconductor company's shares are down 19% to 25.5 cents.

Why are Brainchip shares crashing today?

Today's decline appears to have been driven by the release of an announcement after the market close on Tuesday.

That announcement was a ceasing to be a substantial holder notice, which revealed that a major shareholder and former executive has sold down his holding.

In July last year, the company revealed that co-founder and vice-president of engineering, Anil Mankar, was planning to retire.

Commenting on the exit at the time, Brainchip's under-fire CEO, Sean Hehir, said:

Anil was instrumental in developing Akida IP, our chip implementations and creating our world class engineering department. All of us at BrainChip wish Anil a very happy and well-deserved retirement. I want to personally thank Anil for all his hard work and leaving us with such a strong and dedicated team to carry on the work Anil and Peter van der Made started.

Mankar has since retired and left the company as expected. And while that was a bitter blow to investor confidence, news that he has been selling down his holding could be the nail on the coffin for some investors.

Co-founder sells down holding

The ceasing to be a substantial holder notice reveals that Anil Mankar sold a total of 29,999,833 Brainchip shares, taking him comfortably below what is required to be classed as a substantial shareholder.

Mankar received a total consideration of $14,731,169 for the sales. This is significantly more than the current value of these shares thanks to sales at the end of December following a spike.

It is worth noting that now the co-founder is no longer classed as a substantial shareholder, he is free to sell shares without reporting them.

This could potentially mean that more shares are being offloaded today. Especially given the selling pressure its shares are under. But that is of course impossible to know.

But what is possible to know is that this doesn't bode well for investor sentiment. The market may well be thinking that if the co-founder really believed in Brainchip's future, he would want to be part of it as a major shareholder.

Do brokers think Brainchip is a buy?

None of Australia's brokers cover Brainchip, which is another red flag. Especially given that companies with much smaller market capitalisations have coverage from multiple brokers.

This could be a sign that the broker community doesn't take Brainchip seriously and isn't investment grade. Time will tell if that is the case.