Arbinet-thexchange: Back in the Game

One of my old favorites is making headlines this week. Well, actually there is no news surrounding the company, but Arbinet-thexchange (NASDAQ:ARBX) is getting lots of attention as its share price suddenly jumped by 30%.

This is a company you should be aware of. Arbinet is a very unique business that has created an exchange for telecommunications capacity. Basically, think of it as a stock exchange for bandwidth. It is a tiny company (market cap: $71 million with Monday’s 30% increase) with a potentially huge product.

The birth of a commodity

Now that the entire world is connected through wires and radio signals, bandwidth has been transformed from some mystical techno-babble term into a commodity that needs to be bought and sold on an exchange.

By creating that exchange, Arbinet has the potential to explode with profitability as bandwidth begins to find scarcity and prices increase.

Just as most stocks have done over the past month, shares of Arbinet have plunged. Shares that would have cost you $3.75 or more were trading for just $2.29 at the opening bell. Somebody must believe they are worth far more because share price soared by 30% Monday.

Anytime valuations jump by that large of a spread, you better check it out. A little investigating into this company reveals a lot. First off, a single shareholder (who happens to own large stakes in similar businesses) has shelled out nearly $300,000 over the last month working to get her hands on shares of the company. With over 4 million shares, this stockholder owns more than one-sixth of the company.

Interesting…

Digging through the company’s income statements, it looks as though it may be time for Arbinet to finally turn profitable. It was less than a million dollars (based on total revenues of $136 million) away from black ink last quarter. It would be fantastic news for shareholders. The last time this company saw profitability (Q3 2007), its shares were trading for close to $6.

The company has a strong balance sheet, a strong product, insiders are buying, and share price is popping. All the signs point to a major news event just around the corner.

Take a look at shares of Arbinet and see if they meet your investing thresholds. This company has a lot of potential and is selling at a great price.

Disclosure: none