At least four executives or board members of National RV Holdings Inc. have bought stock in the company since Friday, helping to buoy the Perris, Calif. manufacturer’s sagging share price from a low of $4.16 on Nov. 8 to a recent high of $6.09 this week.
According to the Press-Eenterprise, Riverside, the stock dropped 44 cents, or 7.2%, to $5.65 in trading Tuesday on the New York Stock Exchange, ending four consecutive days of higher prices.
The transactions totaled 69,700 shares at a total cost of $337,246, according to documents filed with the Securities and Exchange Commission (SEC).
The SEC prohibits insiders at any publicly traded company from buying or selling shares in that firm for the two weeks prior to it filing a quarterly earnings report and for 24 hours after.
These blackout periods exist to prevent insiders from using information not available to the public.
Since National RV Holdings was delinquent in filing its financial reports for most of 2005, managers and board members there hadn’t been able to trade since March 15, said Jonathan Corn, chief counsel for the motorhome builder.
The restriction was lifted Nov. 9, a day after National RV Holdings filed its third-quarter results for 2005, which brought the company current, Corn said.
Shares of National RV Holdings had been trading about $9.50 in June, but dropped steadily over the past few months.
On Nov. 8, the company reported a higher-than-expected quarterly loss of $5.9 million, and its shares sunk to a 52-week low.
On the same day, National RV Holdings said the New York Stock Exchange threatened to remove the stock if its market capitalization doesn’t improve.
Market cap is calculated by multiplying a company’s total outstanding shares by its share price.
Corn said insiders aren’t buying stock to try to boost the stock price. Rather, they feel the company is on the verge of success.
“They truly believe it is undervalued,” he added.
The primary reason insiders buy stock in their own companies is precisely that, said Professor Lawrence Harris, the Fred V. Keenan Chair in Finance at the Marshall School of Business at the University of Southern California.
If investors lose confidence in a company, its share price can drop, which can make the stock more attractive to insiders, he said.
“Insider purchases, when viewed by the market, would suggest that the valuation is higher than they formerly thought, which is why the price could rise,” Harris said.