A couple months ago, I saw a tweet about a company I had never heard of. The tweet said that executives of a company had agreed to buy shares in the company at 4X the current stock price. My ears perked up.
The company was Hannover House (HHSE), a tiny Arkansas-based movie producer and distributor.
Then I noticed that otcbargains was touting the stock on his iHub board. He liked that Hannover had eighteen consecutive profitable quarters. It was also selling for roughly 20% of book value. (Note: production companies have strange book values based on expected royalties, and I’m not sure how much stock I would put in this metric in this industry, at least with nanocap companies.)
So I began looking at the company. I almost pulled the trigger when it was at $0.008-$0.009, but I’m glad I didn’t. It went further down as I stayed nervous and did some more due diligence.
Officers of the company had agreed to buy about $400,000 worth of the stock at $0.031 / share. They later said the stock was worth $0.10 and they didn’t want to rip off shareholders by buying near market prices. The company would issue new shares to the executives, so this was a means of funding, too.
The CEO continued to put out abnormal messages (via the company’s blog) touting their own stock. Particularly memorable is September 24th’s Money in the Bank – a reasonable analysis of getting a HUGE ROI off HHSE, where management calls their own stock… “money in the bank.” LOL – you don’t see that very often, do you?
By this time, the stock was down to $0.006-$0.007. And I still had not bought in yet.
There were many risks to be afraid of. The stock had been going down for years, and it did appear to be one of those nanocaps where the management is always talking about “good things are right around the corner” but those good things never materialize. Also, the anti-Hannover House voices on the HHSE iHub board were like nothing I had ever seen before. Company management is very much at war with those they say are illegally talking down the price of the stock on iHub. It was definitely intimidating to go against those loud voices.
Anyway, I bought a stake on September 30 at $0.006. I thought that the short-term dynamics going in the stock’s favor would outweigh the negatives. In retrospect, my timing was fairly lucky.
The next day, it closed at $0.0072, then $0.0083, then $0.0096, and then $0.0125. And if I had sold there, I would’ve had a 108% gain in four trading days!
In the end, what ended up happening was that the CEO kept not filing his Form 4 (on the $0.031 purchases). Day after day, it didn’t come out. I began to get worried that for some reason he would not file the Form 4 and that that could cause a sell-off in the stock, and so I sold less than two weeks after I bought for a final 86% gain in seven trading days, or nine calendar days.
If my calculations are correct, that works out to an annualized growth rate of about 8.2 trillion percent LOL. (1.86 to the 365/9 power minus 1, times 100.)
While I do believe I made a good bet, it would not have worked out so well, so quickly if I hadn’t had luck on my side.