Ok weekenders, let’s talk PMED.
For the newbies in the room, PMED is PredictMedix Inc, a biotech company Equity Guru’s been working with for the past little bit. (Of course, this doesn’t change the fact that we’re still big on holding people accountable – client or not. See recent example here.
PMED as a business leverages its AI machine capabilities to address the critical statistics behind Impairment and illness prevention – including COVID.
They’ve also probably just gotten your attention because of the very recent “scandal” of its CFO selling shares – and reporting it months late.
We’re the first to tell you that moves like that are rarely a good or neutral thing.
That said, we try to give the benefit of doubt by doing our due diligence – especially if we believe in the business model, and the corporate team is receptive towards answering our questions.
Today, we’re working on a Sunday to tell you that tl;dr everything’s fine and still on track. To no-one’s surprise, company executives are human and just as susceptible to mistakes, which we’ll get into later on in this article.
If you just stumbled into this article and weren’t looking for a specific answer, here’s the situation.
- Rakesh Malhotra is the CFO of PMED, and has shares.
- Between May 26, 2020 and July 3, 2020, he sold approximately $140,000 worth of PMED shares, at a price that’s at minimum double the current share price – all unbeknownst to management and the board of directors of PMED.
- The filing to report this sale of stock came eight months later than the time frame required by law (usually 5 calendar days from the transaction/becoming an insider).
SCANDAL, says Lady Whistledown.
Except the truth seems to be a lot less juicy than that.
We asked Rakesh and this was his explanation.
Rakesh sold his shares mid-way through 2020 at a hefty price. He then informed the third party dealing with his filings, within the legal timeframe for reporting his shares sold.
The communication didn’t go through. Rakesh assumed it did.
He doesn’t check his profile frequently and missed that the filing wasn’t reported.
He recently reviewed it, and asked that the mistake be corrected. Per the delay, he was “informed there is a small late filing fee.”
In our opinion, you’re certainly welcome to criticize the fact that the CFO of a publicly traded company isn’t frequently checking in on filings, especially since he’s the most likely to be familiar with the compliance issues.
Question why there isn’t a structure in place where his hypothetical assistant is checking for this, or why he didn’t inform the management or Board of Directors that he was selling the shares (which by the way, is legal for him to do, if at minimum gently unsavoury).
Speculate about why Rakesh didn’t inform management and you all about the filing delay before the news came out and shocked everyone.
We also encourage you to be as mad as we constantly are that the Powers That Be (securities organizations) punish late filings with fees only- because really, what’s the point of the rules if there’s no significant enforcement? This would’ve been no protection for faithful shareholders, had there been something nefarious going on.
The thing is, there wasn’t.
What this whole debacle doesn’t indicate is internal machinations within the PMED team that proves wrongdoings, or that now is the time to bail on the stock.
Here are some of the reasons why:
- “No other insiders have sold any shares” – and that’s a direct quote from the COO of PMED.
- The shares sold by Rakesh Malhotra amounts to less than 0.3% of total shares.
- He still owns 50,000 shares, and has every expectation that the stock will do much better upon their next couple news releases.
- Rakesh’s motivations were unrelated to PMED, and in no way represented his belief in the future of the company.
Most importantly, the two large shareholders include PMED CEO Sheldon Kales and COO Dr. Rahul Kushwah, neither of whom have sold a single one of their shares.
In fact, Sheldon Kales purchased 30,000 shares in the open market in October 2020.
In other words, there was certainly a mistake, but it was an isolated outlier of an event. Human and preventable to a point of inviting critique – but not a red flag indicating the beginning of the end.
We’ve been assured the company is taking further actions in this matter, and additionally, will be providing a corporate update over the next couple of days.
Full Disclosure: PMED is an Equity.Guru marketing client.