A couple days after its market debut and shares of technology company NextNav (NASDAQ:NN) are taking off.
Sunnyvale, California-based NextNav made its market debut last Friday, Oct. 29, when it went public via a special purpose acquisition company (SPAC) deal. The shares ended their first day of trading at $10.60. However, NN stock rose 12% yesterday to close at $12.78, and shares are up another 11% in morning trading.
The catalyst that appears to have sparked the rally is news that NextNav insiders are buying stock in the company where they work.
What Happened With NN Stock?
NextNav is a small technology company that operates in a niche market. NextNav has developed a three-dimensional (3D) geolocation service called Metropolitan Beacon System that provides services in areas where traditional global positioning systems (GPS) or other satellite location signals cannot be received. NextNav claims that its system uses less power than GPS and offers high-precision altitude locations. Essentially, the company offers geolocation services in hard-to-reach areas where GPS doesn’t work. NextNav has estimated its total addressable market to be $100 billion globally.
NextNav went public last week in a reverse merger with SPAC company Spartacus Acquisition Corporation. The deal valued NextNav at $900 million and the shares were priced to begin trading at $10 each. The debut of NN stock was moderately successful, with the share price rising 6% during its first day of trading. However, news that company insiders are buying large blocks of stock has given NextNav’s shares a shot in the arm and sent the price sharply higher. Insider buying is considered a positive development as outside investors view it as evidence that a stock is undervalued and also assume that people who work within a company feel that a share price is likely to rise in the near term.
Why It Matters
Insider stock buying is viewed as a vote of confidence in a company. Conversely, when people who work at an organization are selling their shares, it is seen as a negative development and often prompts a stock to selloff. Insider buying is also viewed as a more substantial development than rumors about a company and its products or financial results. Executives and others are viewed to have preferential knowledge about the company where they work and only buy stock when they feel the current share price is a good deal and/or likely to rise in the future.
Insider buying is viewed as especially positive when it occurs in a newly listed company such as NextNav as it tells outside investors that management and employees believe in the organization and its products. At NextNav, Chief Financial Officer Christian Gates was found to have purchased more than 330,000 shares of NN stock since its market debut last week, which is viewed as a huge vote of confidence in the company. Institutional and retail investors are following suit and buying up stock in NextNav, pushing the share price to new heights. It should be noted that NextNav has yet to report any quarterly financial results for investors to assess.
What’s Next for NextNav?
NextNav stock is moving substantially higher but doesn’t appear to be trading erratically at the moment. The increased share price seems to be driven by news that company executives have been buying large blocks of NN stock, which is a positive development. In this context, it might be worthwhile for investors to consider taking a small position in NextNav stock, keeping in mind that the shares have only be publicly available for a few days and it will be some time before financial results paint an accurate picture of how the company is performing.
Investors who buy NextNav stock should keep their position small to start and see where the share price moves from here.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
