In my last post on Visionstate (VIS) at the end of July, I mentioned that insiders - namely a man named Charles Monte Goble - might be buying on the open market once shareholders at the AGM approved him becoming a control person. This was so that the 20% ownership stake limit could be removed, freeing him up to purchase more shares. While the stock market is hard to predict, I was lucky that this was an easy one. The AGM approval enabled VIS to close $1.1 million worth of capital raises, with him and other insiders taking the vast majority of this amount. It was initially set to be one raise of $500,000 comprising of 25 million units at $0.02, but the company did a follow up raise of $600,000 of 24 million units at $0.025 due to "strong demand". With the strong demand clearly being driven by him.
I am not a fan of dilution, but I am willing to make an exception here. Especially since he is supporting the stock with open market buying. That has led to VIS increasing from $0.02 since my post in July to over $0.05 today. While people who didn't purchase shares at that time may have missed out on a quick 150%, I think there is still plenty of opportunity for profits here.
I talked about fundamentals and the business before. Visionstate has the potential - particularly with $1.1 million in the bank now - but the financials as they currently stand don't support a higher price. That only comes with building that revenue base quarter by quarter until consistent and growing profits are achieved. However, my bullishness in the near term on VIS has less to do with the financials, and more to do with Goble's insider ownership. At of the time of this writing, he now owns over 72 million shares and 57 million warrants:
This is unprecedented. Insane. Goble is the majority purchaser of the two raises plus a ton of open market buying, including significant amounts over the past two days. I'm pretty sure the volume for today (October 9th) is driven by his buying as well, and we will see updated SEDI filings to reflect that. Every CEO in VIS' peer group would cut off their own arm in order to have an insider that is this supportive. Both in his ability and desire to hand over big checks in private placements and buy on the open market at prices well above the financing. I was confident that he would buy shares once the 20% ownership restriction was removed. I didn't think it would be this much, this quickly.
Now one has to recognize his incentive going forward. Every penny that VIS moves up, the value of Goble's position increases by $728,000. With the stock at 5 cents, the warrants are now in the money. Every penny increase above this level will result in the intrinsic value of the warrants increasing by that same amount. That's another $576,000 increase in the value of his position per penny. He has demonstrated a consistent willingness to buy $20,000, $50,000 or up to $90,000 worth of shares on the open market in one shot. Well worth the investment if it's going to result in an increase of over $1.2 million to his portfolio value every penny that VIS moves up.
Take today for instance. VIS released an update about its expansion plans and near-term goals. As a shareholder, I was happy to see this update, but there was nothing in there that would suggest investors who are new to the stock should race in and buy. Despite that, the stock is up 10% on over 500,000 shares traded. A very good day for the typical obscure TSXV listing. Imagine what can happen with a much more exciting news release. Or improved financials. The next financial release for the year ended September 30th won't be due until late January, but there could be other updates before then. Goble's continued buying on top of heightened retail interest, added liquidity from the coming OTC listing and momentum traders piling in could see the stock price accelerate. Accelerate to a price well beyond what current financials should justify.
In addition to the upside, the heavy insider buying implies a high floor. Every large and knowledgeable VIS shareholder who has held on this long to their shares won't be racing to dump their position below $0.05. They know the insider support. They know that with the recent raises, the company's working capital situation is likely the best it's ever been. They know with Shannon Moore leading the way and improvement seen on the last three sets of financials that the company is gaining some traction with respect to its revenue. I highly doubt that anyone will dump significant amounts of shares below 5 cents, and if they do, Goble is likely to clean those shares up.
A purchase of VIS shares at $0.05 looks like a favourable risk to reward trade-off. The floor is unlikely to be below $0.05 for any extended period of time while the ceiling is technically unlimited.
