Shares of the British payments company Paysafe (NYSE:PSFE) jumped nearly 18% today after the company announced that a handful of insiders have been buying large amounts of the stock.
Paysafe announced in a press release today that CEO Philip McHugh on Dec. 3 bought roughly 290,000 shares of Paysafe stock at a total cost of roughly $1 million. The company also announced that between Nov. 12 and Dec. 3 other executive officers and board members bought 447,000 shares of Paysafe stock for roughly $1.8 million.
While insider selling can occur for different reasons, insider buying is almost always done because executives believe shares are undervalued and that the market is not pricing the stock appropriately. The moves, especially in these amounts, can send a jolt through the market as investors feed on the confidence.
And the company needs every bit of confidence it can muster, with shares down more than 70% year to date.
Paysafe, which allows consumers to create digital wallets that can handle many of their payment needs, has generated more than $1.1 billion of revenue through the first nine months of 2021. However, the company also has a lot of debt and is still struggling to make a profit, posting more than a $200 million loss through the first three quarters of 2021.
The vote of confidence from insiders is always nice to see and the big decline in the share price does present a potential opportunity. But companies like Paysafe that come public through blank-check companies can get hit hard if investors don’t believe the lofty projections or if the company misses on guidance, which Paysafe did in the third quarter.
It can take a while for these newly public companies to convince investors, so I don’t necessarily see this as a huge opportunity just yet, but it is worth keeping an eye on.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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