Will RAVE Insider Buying Flip the Short Trade?
RAVE Restaurant group insiders are buying stock amidst the heavy selling that had been occurring since the most recent earnings report. The black out period for RAVE insiders expired last week and the first Form 4 was filed mid-day Friday –
We believe that other insiders have been buying shares since the restricted period ended last week and expect to see more Form 4’s filed this week. We view this as extremely bullish, as the decline in RAVE stock over the last few months has been so severe that some began to wonder if there was something negative happening behind the scenes that had not been disclosed yet. The buying of shares in significant numbers by those closest to what is happening at the RAVE confirms to us that there is no such negative surprise lurking and also confirms that the recent sell off in RAVE shares has left it trading in a range that represents a significant buying opportunity. We note that Director Hammett’s purchase of $30k in RAVE stock increased the number of open market purchased shares he owns by 50%, a very significant purchase by either measure.
We believe the trading in RAVE shares the last few months has been heavily impacted by short selling and that the intensity of the short selling effort has increased over the past few weeks, as the trading action has increasingly been impacted by a program that uses small orders placed with multiple ECNs to shrewdly and efficiently push the price lower. While we have noticed this kind of action to be occurring with RAVE for several weeks now, the Form 4 filed mid day on Friday was the first indication that short sellers may now be on the short side of a buy order from RAVE insiders. Tomorrow after the close, the most recent Nasdaq short interest report will be released and we expect the reported short interest to be at or near the highest levels in the history of RAVE Restaurant Group. With the stock already trading at levels that equate to a large discount to the value of the Pie Five operations alone and insiders making significant open market purchases, we will be interested to see if a report showing RAVE short interest to also be at record levels will be enough to cause the speculators who have been selling RAVE short to either box their short positions or actually flip the trade and go long.