Inuvo Update – Is It A Short Squeeze Or Just Investor Value Discovery?

May 15, 2015 at 9:20 am Leave a comment

Great article out this week on Inuvo by one of our own and it appears from the trading action that it has either ignited a short squeeze or has caused some investors with substantial capital to take notice of the shareholder value being created at Inuvo.  The article gives three very strong reasons for being bullish on Inuvo’s prospects –

1) Very bullish comments by typically conservative Inuvo CEO Rich Howe published in a letter to shareholders this morning –

“As of May 1, 2015 we had a growing and profitable company with an approximate market value of $54 million dollars. We believe we have plenty of room to grow and valuation multiples in our marketspace remain attractive. We are trading at about 1 times trailing twelve month sales in an industry that typically trades upwards of 2 or more times trailing twelve month sales.”

2) Large Open Market Stock Purchases Averaging UP for First Time by Inuvo BOD Chairman and largest shareholder Charles Morgan –

Chairman Morgan filed form 4’s over the weekend that indicated he had acquired another $130K worth of Inuvo stock. We believe any six figure purchase of stock by an insider is significant, but this one is particularly so because we believe that it is the first time since Mr. Morgan first bought into Inuvo that he is making a purchase of shares at a price that is higher than his existing basis – averaging up instead of averaging down. He has made similarly large open market purchases in the past, but most of them were at prices less than half the current trading price and each of those served to bring down the average cost of his holdings. This purchase was substantially higher than his overall basis in Inuvo stock and it was done at prices much higher than previous ones.

3) Acquisition of media/mobile/content giant AOL –

This week it was announced that AOL was being acquired by Verizon. While there are many facets to the AOL empire, the core growth engine is focused on mobile/media/content/advertising – much like Inuvo. While it is not really an apples to apples comparison and I do not believe anyone would suggest that Inuvo is comparable to AOL, the large premium paid for a company with similar lines of business often leads to investors to look around for other smaller players in the space that might be gobbled up at a nice premium. Given the valuation of Inuvo and its profitable and rapidly growing mobile advertising business, it would not be surprising to see one of the larger players in the space make a run at Inuvo. Given CEO Howe’s recent comments, it appears that any discussions would likely require such talks to start with prices in the $4 per share range.

The price has steadily moved higher and the trading volume has increased each of the last two days since the article was published, with a large spike in volume in trading late Thursday afternoon before the close. It appeared for much of the last two sessions that short sellers were actively seeking to thwart any advance in the stock. It will be interesting to see if Thursday’s strong move upwards on very high volume will bring more interest in Inuvo on Friday and if so, if it will ultimately lead to a retest of that $3.50 high from last month.

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