How Far Will Traders Go With Municipal Mortgage and Equity (PINK:MMAB)

There has been some really serious insider tranding with the stock of Municipal Mortgage and Equity (PINK:MMAB) recently. Is this a series of deliberate moves or just a mix of random transactions which happened to take place within a very narrow range? Nothing occurs by chance, in case you still don’t know.

Yesterday, MMAB closed trade at $0.56 per share, up 24.44% from its previous close. A total of 812 thousand common shares changed hands, MMAB‘s third highest turnover for the last six months and four times as high as the daily average volume. Thus, MMAB scored a sixth positive session in a row and is currently showing no signs of slowing down.

Apart from a bond financing agreement concluded in early-December, there has been nothing really viable about the company that could have whetted investors’ appetite that much. Once known as a financial company dealing with real estate tax-exempt bonds, MMAB is no longer as attrative due to deteriorating market conditions, which is how the company explains the sale of subdivisions at a loss. Thanks to the aforementioned bond agreement, MMAB managers raised external capital in excess of $540 million. To do so, they placed bonds at an aggregate fair value of $875.3 million, i.e 62% higher than the proceeds from the transaction.

Surprisingly or not, it was this very transaction that unleashed an unprecedented wave of insider acquisitions and purchases of common MMAB stock. More than 900 thousand shares altogether were acquired this way at a price ranging from $0.29 to $0.40 per share. Compared to the current market price of $0.56, you can only imagine how much these stockholders could profit if they sold their stakes right away. They would profit and you would lose as any sale of such a magnitude would certainly saturate the market. Even if no one decides to sell now, the current market value of MMAB stock is still likely to flop summarily. At least, this is what a technical analyst would suggest after seeing an RSI value of 83.83, i.e “way oversold”.

In a nutshell, MMAB is enjoying a fairly positive market run, which is at the same time a double-edged sword. Unless you are willing to take your chances, you could go for MMAB. Should you prefer risk-averse investments, you would be better off putting your money elsewhere.