Overlooked by Wall Street, Bought by the Board

A cash rich microcap with insider buying

Key Metrics:

• Capital light business with negative enterprise value.

• Cash position bigger than the entire market cap.

• Strong and consistent free cash flow.

• The founder and the entire board are buying stock in the open market.

I’ve had this one sitting on my watchlist for a while.

It turned up while I was working through every US-listed OTC stock out there, somewhere around 2,000 names.

Most of what you find doing that is bad.

Companies that have lost money for a decade straight.

Others have negative equity.

Some have business purposes I’d call questionable.

Not to mention the hundreds of busted biotech companies, or the countless shell companies that have no purpose at all.

But every so often you stumble across something interesting, and once in a while, across something cheap.

This one stood out in particular.

It’s an asset light business, and earnings translate into free cash flow almost one for one.

It’s sitting on a cash position worth its entire market cap, carries no debt, and trades at a negative enterprise value.

So you could argue you’re being offered the operating business for free.

While I was digging through their reports and press releases, trying to understand how the company had evolved and where it might be going next, I came across something that caught my eye.

The company had just announced that its CEO and all five non-executive board members planned to buy stock on the open market:

While there may be many reasons for insider selling, there’s only one reason for insider buying.

They think the stock is cheap.

And once you look at the price, it’s not hard to see why they’d think that.

So let’s take a look at this business.