In a recent Form 4 filing with the Securities and Exchange Commission, Astrotech (ASTC) CEO Thomas Boone Pickens III disclosed a purchase of 1,783,746 shares of common stock on November 1st 2012. The purchase, valued at more than $1.6M, represents over 9% of the total shares outstanding. Mr. Pickens now owns a total of 3.7M shares, or roughly 19% of the shares outstanding.
As Peter Lynch famously stated, in effect, "There are many reasons insiders sell, but only one reason insiders buy." That reason, of course, is because they think the stock is undervalued. It's not hard to see the reason why Mr. Pickens may think the stock is undervalued. The stock is currently trading at less than half of its tangible book value. Essentially, assuming the assets are marked at their true value, the company is worth 2x more in bankruptcy than it is as it sits. Because the company doesn't have any goodwill, or inventory, or other intangible assets that are normally never realized anywhere close to their carrying value in the event of liquidation, we can be reasonably sure the net value of the assets is not being artificially inflated.
Additionally, the future prospects are looking pretty good at Astrotech. Rolling 18-month backlog is still strong at $27.5M with two large potential NASA contracts looming, which will likely be announced within the next few months and can be viewed here and here. This should provide years of steady revenue and profitability for the space operations division. The real wild card in all of this is how the 1st Detect and Astrogenetix subsidiaries play out going forward. Lots of money has been poured into 1st Detect which has developed a miniature mass spectrometer and is in the early stages of sales. The technology is seemingly very good as it was originally developed for NASA. Mr. Pickens apparently has high hopes for this technology as he stated, "The 1st Detect team is focused on opening new industrial markets by delivering lab quality equipment that meets the unique needs of our customers and development partners. I am pleased with our progress and the ongoing support and interest from our development partners as we continue to build important relationships that will enhance future demand." If this division can start pulling its own weight, then the company will likely be highly successful.
It's not very often you see an insider snatch up nearly 10% of a company. I've always preferred to follow the smart money, and there's no better insight as to where a company is headed than from the person who actually runs the show.
Additional disclosure: I may add to this position within the next 48 hours. I am not a financial advisor. You should consult your own financial advisor before acting on recommendations to consider its suitability for your investment circumstances.