Insiders at smaller firms often earn large profits from their stock purchases. This is because stocks with low market capitalizations are generally under researched compared to stocks with higher market capitalizations and are often mispriced by the market.
Here, we are going to highlight an insider transaction at a small US technology company, Everything Blockchain Inc (OBTX:US). Everything Blockchain specializes in blockchain technologies and develops advanced software in this area. It also offers a consultancy service to corporates and individuals in areas relating to blockchain. It’s traded OTC and currently has a market capitalization of $50 million.
Everything Blockchain Inc: Insider Buying
Form 4 filings show that between 6 and 16 July, the CFO at Everything Blockchain, Michael Hawkins, purchased both OBTX shares and preferred OBTX shares. On 6 July, he bought 50,000 preferred series A OBTX shares at a price of $46.59 per share.
Then, on 16 July he picked up 125,000 preferred series B OBTX shares at a price of $15.20 per share as well as 100,000 OBTX shares at a price of $6.00 per share. These purchases cost the insider a total of around $4.8 million.
High Value Insider Transactions
The monetary value of these trades caught our attention. In spending close to $5 million on company stock, Hawkins is signaling that he is very confident on the future prospects of the company. Our Insider Model views this buying activity as bullish.
It’s worth noting that our data shows that Hawkins started buying up OBTX company stock at the start of June. Prior to these trades, there had been no insider buying at the company for over a year.
Everything Blockchain has recently transitioned from an internet marketing company to a blockchain engineer, developer, and cryptocurrency miner. As a result of this transition, it generated a loss for the year to 31 January 2021. When the exceptionals were stripped out, however, this turned into a $1.1 million profit.
“The numbers for FY21, on an adjusted standpoint provide a clear picture of our success in revamping, restructuring, and reorganizing ongoing operations. Our new management team and members of our board of directors have been able to focus on business growth without being in the constant search for capital. With this laser focus we have been able to implement our unique business model and approach to the blockchain where we continue exponential growth in line with the growth patterns of blockchain technology,” said Eric Jaffe, the CEO of Everything Blockchain.
In June, Everything Blockchain acquired Mercury Inc for $1.5 million. This company has achieved around $2.5 million in revenue over the past three years and a 15% bottom line profit margin. Mercury appears to be a good strategic fit.
Given the successful restructuring of Everything Blockchain and the encouraging underlying results, we see the recent insider buying at the company as bullish. It suggests that the insider believes that there is more growth in the share price to come as the company bears the fruits of its new blockchain strategy.