Vitesse: Chapman Selling Shares; Strange Timing On 13D

Robert Chapman filed another colorful 13D yesterday which disclosed a reduction in the number of Vitesse (VTSS.PK) shares he controls (7.3% to 6.2%). This time, it is his trading activity, not his prose, that is most interesting.

The 13D is filled with correspondence between him and Vitesse execs over the previous months, specifically calling for the removal of Lou Tomasetta and Jim Cole from the Vitesse Board of Directors. I must admit that I was disappointed - I expected more shock and awe in his correspondence. Chapman outlines what he believes are conflicts on interest between Jim Cole, Lou Tomasetta, and Gene Hovanec. There’s little here that wasn’t already in the public domain, but he chose to amend his 13D. I do not understand why.

It’s interesting to look at Chapman’s trading activity for the prior 60 days. Recall that Chapman’s average cost going into this period was approximately $1.50 a share, with all but 800k shares bought before June 28th.

Chapman was buying shares at around $1.15 in late November and then disposes of them a week later. Does he know something? Or is he averaging down ahead of doing some end-of-year tax selling?

Whatever the reason, in the last two days following Mr. Chapman's trading reversal, nearly 9 million shares have traded hands, the bulk of which was in large block trades. VTSS stock appears to have reached a support level at $1 today. Is this Chapman selling more? Or another investor?

I’m not an expert on the ins-and-outs of 13D’s, but why did Chapman decide to file at this time? I thought it was any 1% change in ownership, but if this was the case Chapman should have filed in early November. Readers with detailed knowledge of what triggers a 13D amendment please speak up.

Full Disclosure: I am long Vitesse Semiconductor. Investment Thesis can be found here.