Shareholders in Ellies have taken some hefty losses after the stock plunged in value, becoming a negative ten-bagger. They would have done far better by paying closer attention to publicly disclosed trading in the shares by founder and chairman Elliot Salkow.
On the Stock Exchange News Service today, the company disclosed that Salkow has managed to avoid the worst of the share price plunge from R10 to the current R1.23. He exercised a put option on 1,15m Ellies shares selling them for 563c each.
That generated cash of R6.5m, a hefty premium on the R1.4m he would get if selling the stock in the open market today. Salkow stands to cash in another R10.8m over the next three months by exercising the option to sell shares available in the market today for R2.4m – another notional profit of R7.8m.
Under the terms of a Call Option that expired earlier this year, Salkow sold another 5m shares at 358c each. This was concluded in 20 equal tranches between September 2013 and June 2014, generating cash of R17.9m for shares that are today worth R6.15m.
In total, therefore, by the end of the “zero cost collar hedge”, the Ellie in Ellies will banked R35.2m for the sale of shares now worth a more modest R10m. A juicy R25m “profit” on the current share price. Suggesting that it pays to watch the trading by companies insiders.
