Radcom Inc. (NASDAQ: RDCM) has turned radical, with its long-ignored stock ripping to the double-digit levels reached in 2006 and earlier.
The Tel Aviv, Israel-based company switched from its money-losing hardware business about nine months ago. Investors went mad when Radcom pulled its finances out of the red as it introduced software designed to address customer service problems for telecom companies.
In fact, investors inflicted with Rad fever have plunked down three times more for Radcom than other industry stocks.
But there’s trouble ahead.
Indeed, the company’s stock historically rises on hype, while it drops on insider sales and large private stock sales. Check out the chart below showing the rise and fall of Radcom’s stock price – a chart that predicts Radcom shares will likely collapse again in the near future.
The chart shows that Radcom stock rocketed on hype about a Chinese company choosing a Radcom product (March 2010). When investors learned Radware would be acquired (September 2010), the sympathy hype continued to push up Radcom’s stock.
Then the stock collapsed as the CEO and the vice president began dumping shares. The stock took another hit from the April 2013 PIPE deal – a $3.5 million private stock offering. Overall, Radcom’s value plummeted in a few months from $14 to $4.
Radcom could not seem to step off that value-eating path as its hardware business lost ground. The stock finally took a teeth-shattering fall off the cliff on Halloween 2012, dropping to 2 bucks and change. So stock once worth $1,000 sunk to a worth of about $145.
So what does the chart predict of the stock now?
We’re seeing hype again followed by the upward zig of the stock.
Then the CEO, two vice presidents and a director sell stock again. The stock zags downward, and gets jazzed once again by hype (Radcom’s financial report and MaveriQ product purchase order announcement). Now watch for the drop.
Next, let’s look at that insider selling – and why most investors have missed this key supporting factor to the predictive chart.
Insiders have been selling Radcom stock – at about $5 per share – while flying under the radar. And we anticipate more selling ahead.
CEO David Ripstein and other insiders have dumped tens of thousands of shares of their company in the last 11 months. And for far less than the current price.
But average investors have missed all those sales.
Why? Those are Form 144 sales that are not available on Yahoo and SEC Edgar. So investors without Bloomberg access are denied access to this valuable key to making investment decisions.
The charts below show more than 20 separate sales that most investors missed completely.
All that insider selling – predominantly at ~ $5 compared with shares currently fetching about $11 – raises red flags.
First, it suggests insiders don’t trust the future prospects of their own company.
Second, insiders will likely sell more shares because of the current stock price spike. In fact, this selling sentiment may well extend further. After all, Radcom’s filings specifically warn, “we may decide to raise additional funds in 2014.”
Investors may find other viewpoints on Radcom here.
We’ve covered many dicey companies and this one eerily reminds us of PhotoMedex (PHMD, then $15.49, now ~$1.70 )Radcom shares are running about $11, a radical 84 percent jump since October. Based on the historical chart and jaw-dropping signals, we expect Radcom stock to drop back to reality.
In fact, we wouldn’t be surprised to see the stock drop back to the $5.50 level it fetched before the hype ever started. And that price level is very generous.
Don’t miss the next installment of our Radcom series, coming soon. In Part 2, we list the top three reasons we expect Radcom will follow the trend shown by the chart.
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