When a penny stock doubles in price over the course of a month, and dollar volume starts to exceed $1 million dollars, you scream Whiskey Tango Foxtrot. Well, even traders didn’t budge when Signature Group Holdings Inc. (SGGH) produced their Q2 earnings over a month ago reporting over $9 million in revenue from their wholly owned subsidiary North American Breaker Co., LLC, NABCO which they acquired just over a year ago. But when insiders started buying SGGH stock, it has sent the shares into orbit setting a new 52 week high Friday.
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SGGH Stock Chart
Market Cap: 61.30M
Close: 0.53, up 0.035 (7.07%)
Volume: 1,888,925
Dollar Volume: $1,000,022
High: 0.54
Low: 0.4975
Trades: 84
Average Trade Size: 22,487
Authorized: 190,000,000
Issued and Outstanding: 120,143,247
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On August 9th, Signature reported their Q2 results for the three months ended June 30, 2012. Would you believe that having 5 warehouse locations across the country to service replacement circuit breakers with next day ground shipping could be exciting? How about to the tune of $9.06 million in revenues for the three month period, almost 159X more than what they booked selling pimple cream and nearly 14X what Signature booked from their “Special Situations.”
Although the net result from the Company’s NABCO subsidiary generated a net income of $738,000 for the three month period, the share price went no where: 10,623 shares traded between 0.278 and 0.28 on August 9th. So did it matter that NABCO and the Special Situations sectors of the Company booked $16.9 million and $2.10 million in revenues respectively for the six months ended June 30, 2012. Did it matter that the two generated net income of $1.40 million and $4.31 million respectively for the six months ended? (Note: $2.40 million of other income was booked in Q1 under the Company’s Special Situations operation.)
The best part, Signature maintains federal net operating loss tax carryforwards in excess of $890 million!
It wasn’t until some insider buying towards the end of August that the share price of SGGH stock finally got a spark within a nickel of its 52 week and three year low of 0.23. So, for nearly 3 weeks after the 10-Q was filed, SGGH stock price remained under 0.30, a treasure hunter’s dream. However, a pending litigation case was still looming over the Company.
Like Yippy Inc. (YIPI), Signature Group Holdings’ SGGH stock joined the OTCQX in April, the green OTC symbol for those playing along on OTCMarkets.com. Prior to Signature Group emerging from bankruptcy protection, Zell Credit Opportunities Master Fund, L.P. acquired 21,000,000 Trust Originated Preferred Securities issued by Signature Group for investment purposes which the Master Fund exchanged for 1,159,200 shares of SGGH stock. Between June 2, 2011 and July 22, 2011, the Master Fund purchased 4,272,497 shares of SGGH stock in open market transactions.
On August 29, 2012, as part of the settlement agreement with Dissident Group, the Kingstown Group completed the sale of 5,478,953 shares of the Company’s stock to the Zell Credit Opportunities Fund. This was the driving factor for the recent upsurge in SGGH stock price: the August 24 and August 29, 2012, purchase by the Master Fund of 550,000 shares and 5,298,772 shares, respectively, of SGGH stock at a price of $0.29 per share. (see here)
Now that all pending litigation and all legal proceedings have been dismissed and the parties have released and discharged each other from any and all past and future claims, SGGH, having climbed 92.86% since filing their 10-Q, can continue to surge.
About SGGH Stock
Signature Group Holdings, Inc. is a diversified business and financial services enterprise with principal holdings in cash, financial assets, and controlling ownership interests in two operating subsidiaries, North American Breaker Co., LLC (“NABCO”) and Cosmed, Inc. (“Cosmed”). NABCO, a wholly owned subsidiary, is one of the largest independent suppliers of circuit breakers in the country, focused on the replacement market, particularly for commercial and industrial circuit breakers where replacement time is extremely important, but it also supplies residential circuit breakers in order to provide its customers with a single source solution for their circuit breaker needs.
Cosmed, 92% owned by the Company, does business under the trade name Cosmedicine™ and owns the intellectual property and proprietary product formulations for a line of anti-aging skin care products. The Cosmedicine formulations are proven effective at reducing dryness, fine lines and wrinkles, skin discolorations, and multiple forms of acne. Cosmed markets and sells its skin care line in specialty retail stores across the country, as well as through certain specialty internet channels.
The Company’s Signature Special Situations business unit primarily acquires sub-performing and non-performing commercial and industrial loans, leases, and mortgages typically at a discount to unpaid principal balance. The Company may also originate secured debt financings to middle market companies in a variety of situations, including supporting another transaction such as an acquisition, recapitalization or restructuring by taking positions in corporate bonds, trade claims, and other structured debt instruments, which may be performing, sub-performing or non-performing as well as acquire specialized assets, such as product or brand licenses, royalty streams, or subscriber bases. The largest asset in this segment is a portfolio of residential real estate loans.
Click here to read the SEC filings for SGGH.
Bottom Line: SGGH is one heck of a hot penny stock and should be on the list of traders/investors already now that the distraction of their litigation and related proxy process is behind them. If Signature can continue to crush revenue numbers with tier NABCO subsidiary, investors might start asking to get an autograph on their SGGH stock cerificates.
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