Yesterday, AER Advisors, in tandem with wine mogul Peter Deutsch, released an SC 13D filing for ZST Digital Networks (NASDAQ:ZSTN). They are continuing to accumulate shares as I predicted they would here.
AER Advisors now owns 2,742,250 shares, or 23.64% of the company, and Peter Deutsch owns 2,132,000 shares, or 18.38%. That's compared to the last filing where AER Advisors reported ownership of 1,297,396 shares, or 12% of the company. Since they now own over 20% of ZSTN, they are active shareholders and are required to file an SC 13D form instead of an SC 13G form.
In a span of less than two months, the duo have accumulated an additional 28% of ZSTN. All it will take for them to own over 50% of the company is to buy another 1.1 million shares. Things could get interesting from there.
If you would like to know a possible future for ZSTN's stock, check out the China Medical (CMEDY.OB) stock chart. The systematic accumulation of ZSTN is an exact repeat of what's happening to CMEDY. AER Advisors was purchasing CMEDY before it got delisted, then after it got delisted they kept buying at under $1.00, and kept purchasing shares all the way up to its over $10 share price today. With ZSTN, AER Advisors also started accumulating right before it got delisted and to this day hasn't stopped. ZSTN's share price is currently right about where it was before the delisting. This isn't a guarantee that ZSTN will act like CMEDY, but if it does, it could break $10 per share in a couple months.
The main reason why CMEDY has shot up so much, is because the float has gotten much smaller since AER and the Deutsch brothers have accumulated so many shares and effectively taken them off the market. Share transactions start to have an exponentially more powerful effect on the stock price as the float shrinks. There has been a lot more buying than selling from investors, because most people would rather buy shares rather than short them since they know that AER is continuously buying. CMEDY has also been going through a big short squeeze, which also helped it rocket up. A smaller percentage of ZSTN's shares are short.
I am a former holder of CMEDY, but I'm more comfortable holding ZSTN. ZSTN management haven't gone "dark" like CMEDY and they speak with shareholders. CMEDY has $430 million worth of debt, ZSTN doesn't have any debt. According to its last 10-K filing ZSTN has $23.7 million in cash and a book value of $6.20 per share. Currently, its PE ratio is only 1. CMEDY's PE ratio is 15. Of course, it is questionable whether ZSTN's financials are accurate since its auditor resigned and the stock got delisted. However, AER Advisors and Peter Deutsch have such a large position that they must have some kind of plans with ZSTN's management. I can see a buyout or some kind of M&A activity happening later this year.
Disclosure: I am long ZSTN.