Market Overview

Wild Child Of The Week: MGT Capital Investments

Wild Child Of The Week: MGT Capital Investments

It seems that every week, there is one more issue that blasts onto the trading scene. Often there is news on the issue, which attracts the fancy of day traders, the algorithmic and HFT crowd and sometimes — to little surprise — even a few hedge funds jumping into the fray to make a quick buck.

The award for the most frenzied trading so far this week belongs to MGT Capital Investments Inc. (NYSE: MGT). Actually, the action started last Monday, when the issue hit the wires for the first time since November 13. On that day, the company posted a Q3 EPS loss of a dime on a whopping $90,000 in sales.

In its Q4 report, the company showed a loss of ($0.06), with no reported revenues.

Related Link: MGT Capital Traders Taking Some Profits After Bearish StreetSweeper Report

The Inciting Incident

What initially set the issue in motion was the announcement that the company acquired computer security software from D-Vasive for 23.8 million shares of stock. That didn't really move the needle, as the issue posted a modest increase from $0.36 to $0.49. The momentum carried over into the next two sessions to close at $1.27 on Wednesday. With each day, the volume increased significantly, thrusting the issue onto trading scanners worldwide.

Investors acted nonchalantly last Thursday to news the company had purchased an ownership interest in Round House. It added $0.25 on Thursday and ended the week $1.72.

Once the weekend scanners kicked in, it was off to the races — rallying to $2.96 on Monday, $4.15 on Tuesday and may have peaked Wednesday. Off the open, it reached $5.58, and is now back under $4.

TheStreetSweeper's Interruption

TheStreetSweeper interrupted the rally on Tuesday, when it issued a negative report on Tuesday afternoon, but that just added to the volatility. The issue shrugged off the warning, "that a wacky ex-millionaire (John McAfee) is using a shell company to buy the company he already owns, even though his private company is worthless." Investors should be aware that McAfee retweeted on May 9 that he was named CEO of MGT.

Related Link: Market Blows Off TheStreetSweeper's MGT Warning

Initially it shrugged off the report, and after a brief decline, continued its upward trajectory that didn't end until Wednesday. The price of the issue at the time of the initial tweet was $4.54; it declined to $3.69 before ending Tuesday's session at $4.15.

Most Recent Movements

Despite the blow-off rally to $5.58 in Wednesday's session, the issue is nearly $1 lower than when it was attacked by TheStreetSweeper. The issue is on track to topple Tuesday's monster volume of nearly $110 million as 70 million shares have traded with over three hours remaining in the session.

The bearish report is resonating with traders in Wednesday's session and little known Aqua Research tweeted negative comments on the company. TheStreetsweeper issued an updated report, and the company has reported a 5.01 percent stake in Venaxis in its 13D.

At this time, investors in the issue over the past week are beginning to seriously evaluate whether the recent fundamental news in the company has justified the huge price appreciation since May 6. At its peak in Wednesday's session, it was nearly 1,500 percent above its May 6 close of $0.36.


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