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Sunday, January 17, 2021

The Latest on MGT Capital Investments Inc. (OTCMKTS:MGTI)

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MGT Capital Investments Inc. (OTCMKTS:MGTI) is a micro-cap that we have covered on several occasions. The company is certainly an interesting story: working its way through a dramatic operational pivot into the cyber security space, now led by industry veteran John McAfee of internet bubble fame and some following scandal. Google at your leisure. It’s quite a story, and no one is certain of all the facts. Suffice it to say, Mr. McAfee is clothed as both savior and goat as he takes on the marketplace with a new set of company plans and goals.

That forms the backdrop for what has been a remarkable two-day sprint higher. We see no filings, no news, no promotional activity (that we could find). And yet, the stock has risen as much as 87% over the past 48 hours, as of the close on Wednesday. One possible explanation at this time of the year is the so-called January effect, as we discuss below.

MGT Capital Investments Inc. (OTCMKTS:MGTI), as noted above, is in the process of acquiring a diverse portfolio of cyber security technologies and ramping up its Bitcoin mining operations in the state of Washington.

With cyber security industry pioneer, John McAfee, at its helm, MGT Capital is positioned to address various cyber threats through advanced protection technologies for mobile and personal tech devices, including tablets and smartphones.

The Company is currently in the process of acquiring D-Vasive, a provider of leading edge anti-spy software, and Demonsaw, a provider of a secure and anonymous file sharing software platform.

MGT Capital intends to change its corporate name to “John McAfee Global Technologies, Inc,” and has asserted its right to do by seeking a Declaratory Judgment in U.S. Federal Court, Southern District, NY.

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As far as the sudden large rally, I invite you to imagine some very big money coming in midway through the year last year, after the announcement of Mr. McAfee’s installment. The cost basis for such a holding would likely be close to $4/share. The announcement of this stock as something of a vehicle for McAfee’s re-entry into the cyber security game – in some ways, a legend returning to the fray – and coming at a time when Russian hackers and Wiki-leaks and other stories were dominating the media… that likely drew many new fans in its wake.

And yet, the stock has performed horribly since then.

By December of 2016, such investors were no doubt holding massive losses – every one of them – perhaps as much as 75% in many cases.

That may have been useful to offset taxable capital gains in other more lucrative positions for these same investors, thus creating a large, steady presence on the offer over the final weeks of the year. Once this week started, the stock awoke to a new year, without that offer as the new fiscal book opened.

And momentum fed on itself from there.

Whether or not this is an accurate framing of the action, time will tell. We certainly haven’t seen any new catalysts emerge.

Overall, recent action has seen 61% piled on for shareholders of the stock during the trailing week. Furthermore, the company has seen interest climb, with an increase in recent trading volume of 48% over what the stock has registered over the longer term. This should not be overlooked given the stock’s tight trading float of under 24M shares. Traders should not overlook this combination, as a jump in average daily transaction volume in a stock with a restricted float can unleash fireworks as supply is squeezed.

Currently trading at a market capitalization of $32.5M, MGTI has a chunk ($2.2M) of cash on the books, which must be weighed relative to virtually no total current liabilities. So, the balance sheet is excellent here.

MGTI is pulling in nominal trailing 12-month revenues (of $53K). However, the company is seeing declines on the top line on a quarterly y/y basis, with revenues falling at -41.1%. That said, that is data about a company that used to exist. The new one is still a wide open issue. The trading dynamics aren’t great, but we wouldn’t be too hasty to “write this one off”. For continuing coverage on shares of $MGTI stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!

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