CATASYS INC (OTCMKTS:CATS) Sinks on Record Volume

Following a tamer, multi-day price slide that took place last week, on Monday the share price of Catasys Inc (OTCMKTS:CATS) took a major nose dive. CATS plunged a painful 36% on the charts yesterday, on a massive spike in volume. As 442 thousand shares changed hands – an all-time record for the ticker – CATS managed to screech to a stop at $0.36 by the closing bell.

CATS stock was rather thinly traded over the last few weeks, with multiple days having less than 5000 shares traded in total. Yesterday’s volume spike and severe price slide would appear to have been triggered by a filing the company put up last Thursday.

The 8-K in question informs that CATS executed a stock purchase agreement, with two other entities buying CATS common shares. One of the purchasers is an entity 100% owned by CATS CEO Mr. Peizer, the other is owned by two CATS directors. While there is nothing inherently wrong with this deal, the catch is that the two purchasing entities got their shares at a massive discount from the market price.

On the day CATS closed at $0.57 per share, the two purchasers got their $2 million worth of CATS stock at $0.30 per share. Selling stock well below market prices is always a red flag, but when this cheap stock is sold to entities owned by company insiders, things can get really hairy, and they did yesterday.

CATS executed a similar deal in mid-September, selling 1.5 million shares at $0.30 once again, and the shares were purchased by yet another entity owned 100% by CATS CEO Mr. Peizer.

It only makes sense that traders would like to get an equally cheap buying opportunity, so yesterday’s 36% slip should not be too surprising.

In its latest quarterly report CATS listed $152 thousand in cash, nearly $6 million in liabilities and a net loss of over half a million.