Telecom Insiders Take Advantage of Lows to Buy in Numbers
By Kevin Schwenger
From "Company Sleuth"
May 30, 2000
Three telecommunications companies that specialize in managing voice and data communication for businesses witnessed sizable acquisitions among their executives in the latter half of April. Like the majority of Internet-related stocks, Convergent Communications, Inc. (CONV ), PTEK Holdings, Inc. (PTEK ), and e.spire Communications, Inc. (ESPI ) have all seen their share prices plummet substantially in recent months amid the market''s concern that such stocks were overvalued to begin with. The insider purchases occurred as the share prices neared all-time low levels. Perhaps this suggests a belief among these insiders that the recent bearish market sentiment was an overreaction, and that their stocks may be true bargains.
CONV began trading on the open market last July at around the $21.00 level. Since then, its stock has dropped approximately 70 percent to its current all-time low of $6.50. In March and May, the company reported substantial increases in its revenues for fourth quarter 1999 and first quarter 2000, respectively. Additionally, on April 5 it announced the appointment of a new Chief Executive Officer, former US West executive Joseph Zell, who has a proven track record of leadership and expertise in data network integration. However, these events did not stop the decline in CONV shares. The story is much the same for PTEK, which in April reported strong first quarter revenues for its three operating units. Nevertheless, its stock has plunged almost 80 percent over the past year, with its sharpest decline occurring over the past three months.
At CONV, three insiders bought a combined 152,000 shares from April 14-19 at prices between $7.00 and $8.50, including out going CEO John Evans and Vice President Philip Allen who picked up 95,000 and 50,000 shares, respectively. Both executives left the company on April 17. This activity represented only the second ever insider purchasing at Convergent, the first occurring last August. Additionally in March, three other executives exercised a combined 140,000 stock options, but have chosen not to sell any of the underlying shares. Five executives at PTEK bought a total of 124,500 shares on April 25 for $4.31, including CEO Boland Jones, Chief Operating Officer Jeffrey Allred and Vice President Patrick Jones, who acquired 60,000, 50,000 and 10,000 shares, respectively. Insider purchasing at this company is also quite rare with the last addition occurring in September 1998. ESPI''s CEO George Schmitt and COO Christopher Resavy completed the largest purchase at the company in three years by adding a combined 143,300 shares between April 19-27 at $4.56 to $6.13.
The recent insider purchases at these three companies have several things in common. All occurred in mid-to-late April, when the stocks were trading near all-time lows, and each involved at least two high level executives buying a combined total of over 100,000 shares. Previously, there had been an absence of insider purchasing at all three companies for at least six months prior to these trades. Additionally, these were the first-ever consensus acquisitions for CONV and PTEK. All of these factors seem to indicate that these executives believe that the worst is over and their stocks are poised to perform well in the coming months.
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