IncrediMail: Drop in Share Price Isn't Based on Fundamentals

| About: Perion Network (PERI)

I already have a large position in IncrediMail (MAIL) but I could not look at this opportunity any more and stand on the sidelines. So yesterday, I bought more MAIL. I put my money where my mouth is.

I wrote in the previous post:

The market puked yesterday on news that Ofer Adler, CEO of IncrediMail (MAIL), and Yaron Adler, Board Member, both sold stock in the last month. In fact, Yaron Adler sold a lot of stock, two-thirds of his holding.

As MAIL's share price is off 20% since its peak and is off almost one dollar as of this writing, I think a little perspective is in order.

  1. Yaron Adler has not been actively involved in the company for a long time. Despite being on the board, based on all the data I have collected, he is not involved. As the stock price appreciated, Yaron had a chance to take cash off the table and further disassociate from the company, and he did. Further, Yaron Adler is up for re-election as a director at the next elections (end of year, I believe). I would not expect to see him back on the board after the election.

The drop in the share price is, as far as I can tell, not based on fundamentals. I think it is based on further selling by Yaron Adler. Here is why I think that:

  1. Volume in the stock is pretty high. This means someone is selling a lot. Yaron Adler started this process with around 1.25 million shares. He is the only one other than Ofer Adler with enough stock to sell in these volumes unless some big institution is unloading.
  2. There seems to be a floor price of $7.50 on the sell order. Every time I try to buy at $7.50, it snaps up a bit. That was a pretty low floor to put in for someone who bought on the open market recently.
  3. I checked with the company today and they are not in closed trading windows. So a board member can sell.

I know this is circumstantial and not conclusive, but with a dividend of 40 cents a share coming after it works its way through the Israeli courts, and no negative news on the business that I can see, this is my only conclusion.

Full Disclosure: Very Long MAIL