Sancus Lending Group (LON: LEND) shares are up 115% this morning on the back of an announcement of a share purchase by the CEO. Well, OK, insider share purchases are often a good guide to what those insiders - who do, after all, have more information than we do about the business - think of the business' prospects. So if insiders, directors, management, buy shares then we should indeed take note. Even bid up the shares in response.
But it is possible to take this much too far and we'd say that is true here with Sancus Lending. The group's annual results weren't greatly impressive even though there's all that talk of a turnaround: “Group revenue increased by 11% to £10.0m FY22 (FY21: £9.0m); Operating losses narrowed to £4.7m (FY21: loss £10.2m);” Well, yes, we'd all rather hope there's an improvement from that. Losses of half operating revenue aarp;t things that can be supported all that long. And given the Group's business line - lending, obviously - we're not that sure about growth possibilities there. As all too many challengers to banks have found over the years lending money is easy. Lending to people who are worthy of lending to is the difficult part. This gets more difficult in stressed economic times of course.
Sancus Lending Group share price from London Stock Exchange
The thing that makes us snigger though. Yes, there's this turnaround story. Yes, the CEO has just bought into the shares. That's a good sign. Hey, the CEO bought 1,000,000 shares, a million. So of course the price went up, he's really putting his money where his mouth is!
Well, yes, except we can tell this exact same story another way. The CEO bought a million shares at 0.5 pence each. That's £5,000. Yes, five thousand pounds. The response from the market has been to add £2 million - yes, that's two million - in market capitalisation?
That, umm, well that does seem to be a bit of an over-reaction, doesn't it? In fact it's one of those reactions that we don't believe for a moment. At least, we're really near certain that it's something that will fade back as people consider this. No, the CEO spending £5,000 on the company stock does not merit a £2 million increase, a 100% and change rise in the share price.
Yes, quite obviously we could be wrong about this but we expect the Sancus share price to drift down again. Because the current reaction to that purchase is giggle worthy and no more.
