Corvis Execs Get Bullish
Huber himself bought 265,000 shares of stock, and the three others bought 25,000 shares apiece. Experts who follow insider trading are optimistic.
"It’s good that we are seeing a number of insiders buying stock,” says Lon Gerber, director of research at Thomson Financial/Lancer Analytics. "And it’s not just one; it’s a group of them, and that’s a good sign."
But when the amount of stock bought is compared to the amount of stock these executives had sold throughout the year, it becomes clear that these executives are not exactly betting the farm on Corvis.
“Specifically, for David Huber this amount is pretty minimal, compared to the disposition he owns,” says Gerber. On September 28, Huber spent $1.50 per share or a total of $397,000 for 265,000 shares. To the average investor, this is a rather sizable hunk of change. But Huber and trusts in his name own roughly 87 million shares in the company (see Corvis Corrects Huber Holdings). And he has already profited massively since the IPO. The trusts associated with Huber have sold more than 6 million shares, $94 million worth of stock, since the lockup period on the shares expired in January (see Eyes on Corvis Lockup Expiration).
The company’s stock has plunged from a high of $108 to about $1.70 a share today (see Avici and Corvis Make Stunning Debuts), giving the company a valuation ($610 million) that is less than the amount of cash it held as of last quarter ($770 million). Over the last nine months, investors have been spooked by capital spending cuts undertaken by Corvis’s largest potential customers, as well as mounting losses and insiders selling shares.
The company, which had been through seven rounds of funding and two acquisitions before it went public last July, attributes this volume of insider trading to investors who were looking to cash out after the IPO.
"What I think this shows is that the executives of the company see the long-term prospects of the company,” says Andy Backman, director of investor relations for Corvis.
Each of the other three executives who bought stock on September 28 have also made huge profits from stock sales throughout the year. Anne Stuart, Corvis’s chief financial officer, sold 215,000 shares, bringing in gross proceeds of $2.8 million. Terence Unter, chief operating officer, has sold 260,000 shares, amounting to gross proceeds of $2.6 million. And Kim Larsen, vice president and general counsel for Corvis, took in $1.5 million from the sale of 89,600 shares.
Backman says none of these executives had direct input as to when or how many of these shares would be sold. In the case of David Huber, almost all of the 6 million shares were sold through a trust or limited partnership that he had established. The Columbia Trust, set up for Huber’s family, is managed by independent managers, according to Backman.
As for the other executives, Backman says they were on a structured stock-sale program that would automatically sell options according to a schedule. The plan officially ended in July after the company’s last earnings call.
Meanwhile, Corvis seems to be getting closer to generating revenue from a contract it supposedly signed last quarter with France Telecom SA (see Corvis's French Connection and Corvis's Future Brightens). While the company has not officially announced the contract, this morning Corvis announced that France Telecom has agreed to field test its CorWave LR along an 800 km terrestrial link (see Corvis Gets French Trial). The CorWave LR provides point-to-point transport over distances up to 2000 kilometers with up to 3.2 Tbit/s capacity, says the company.
The field trials are expected to begin by the end of the year. Even though discussions of a purchase agreement are still under wraps, the fact that France Telecom is announcing trials gives investors some hope that Corvis will be able to add at least one more revenue generating customer in the next few quarters.
Corvis's stock was trading at $1.70, up 0.18 (11.84%), in early trading. The company will report its third-quarter earnings on October 22.
- Marguerite Reardon, Senior Editor, Light Reading