Inca One Gold’s (IO.V) share price got hammered in the past week after some trigger-happy hands sold a lot of stock on the back of new insider filings showing the main C-level executives of Inca One had sold in excess of a million shares.
However, there was no net sale of any stock. What happened was that some investors wanted to take a sizeable position in the company at 15 cents but were unable to do so on the open market. In such cases a private placement is the best solution to accommodate such investors, but some funds are unable to purchase securities with a mandatory 4 month hold period. A very common solution in this situation is the company sourcing and providing a block of free-trading shares to those investors, whilst the sellers of that block will participate in the private placement to obtain a zero net effect.
In Inca One’s case, it was the management team which provided the large block of freely tradeable shares to those (European) investors, and the market mistakenly seems to have interpreted this as Inca One’s management team selling out by dumping their stock. Meanwhile, Inca One has closed a private placement, raising C$600,000 at C$0.15 per share, and according to the most recent insider filings, Inca One’s management team has indeed reinvested the funds from selling the freely tradeable stock into the placement. CEO Edward Kelly bought 1.47 million shares, COO George Moen bought 799,200 shares and Vice President Mark Wright bought 342,000 shares, for a total of 2.611M shares and C$400,000. (see Canadian Insider)
As you notice, there has been NO net selling by the insiders. On top of that, they didn’t give themselves a ‘sweet deal’, as the placement was priced at C$0.15 without any warrants at all, so self-enrichment definitely wasn’t the case here, and the only reason to conduct this gypsy swap was to accommodate investors who were unable to accept restricted stock.
Could Inca One have avoided the market crash? Maybe, it could have announced the gypsy swap before it conducted it, but that usually doesn’t happen at all. So it looks like some weak hands sold Inca One stock on the back of the insider sales without realizing the insiders would repurchase the same amount of stock in the private placement. And the C$600,000 cash inflow will help to reduce Inca One’s net debt position and to increase the amount in the piggy bank to purchase more ore for the Chala One plant where the new tailings pond has now been commissioned.
Inca One is currently trading at C$0.12, or 20% below the value where its insiders have acquired more shares, and this smells like a good opportunity.
Disclosure: The author holds a long position in Inca One Gold and has bought more shares this week. Inca One is a sponsor of the website. Please see our disclaimer for current positions.