Shares of MGT Capital Investments Inc (NYSEMKT:MGT) have rocketed higher on a perfectly executed short squeeze. The company was successful in combining news with a paid promo to send the shorts covering and penny stock traders chasing the next microcap runner. Smart investors are asking what’s next after shares moved from $.40 to almost $2.
The move started on May 9 when the company announced “the proposed appointment of John McAfee as Executive Chairman and Chief Executive Officer. Mr. McAfee, the visionary pioneer of internet security, sold his anti-virus company to Intel for $7.6 billion, and is actively involved in the development of new measures to protect individual freedoms and privacy. MGT Capital also intends to change its corporate name to John McAfee Global Technologies, Inc.” John McAfee said:
“The enormous impact of cybersecurity on our lives requires the scale and resources of a public company. Our ability to continue to hire the best minds in the business will be vastly enhanced with a public platform. With the acquisition of D-Vasive technology as a starting point, we expect to grow MGT into a successful and major force in the space.”
Closing of the acquisition is contingent on customary conditions including approval by MGT’s stockholders. Major terms of the deal include the payment to D-Vasive Inc. stockholders of 23.8 million restricted shares of MGT stock and $300,000 in cash. The proposed share issuance is expected to amount to roughly 47% of the Company on a pro-forma fully diluted basis at closing.
Then on May 12, MGT announced that “it had acquired a Membership Interest in The Round House LLC, an Alabama-based technology incubator, offering co-working space, accelerator services and angel investment. Located a few miles from Auburn University, Round House was founded by Kyle Sandler, a successful serial entrepreneur with eight years of experience at Google and three major successful technology exits. With an experienced executive team, Round House has attracted top entrepreneurs from Google, E-Nable, Rockstar Games, American Express, and many more companies. Round House offers start-ups a creative and collaborative environment along with two-way Gigabit internet access, 3-D printers and a full-time community engineer.”
The most high profile part of Round House is its investment in RecMed, which was started by 14-year-old Taylor Rosenthal, a ninth grader from Opelika, Alabama. He and Round House founder Kyle Sandler made headlines when he “supposedly” turned down $30 million for his computerized vending machine company that dispenses first-aid products even though it has not sold any machines yet. According to CNBC, “the young entrepreneur said he was “hoping” to strike a deal offering him $50 million to sell soon. RecMed has already raised $100,000 from angel investors.” Yes, you read that correctly. He has raised just $100k. He has never sold a machine. Everything is just talk. The story reminds us of the 17-year-old who lied to NY Mag about making $72 million.
If you Google Kyle Sandler and John McAfee, you’ll find an interesting connection. An Inc. magazine profile of John McAfee said:
Campaign advisor Kyle Sandler is hovering around, wearing at #McAfee16 T-shirt. “If you wanna give him shit about kissing babies you should have reached out and talked to us,” says Sandler, a former Google employee who now runs Opelika, Ala., startup incubator Round House. Opelika apparently has a great fiber-optic network, and according to Sandler is becoming a startup hub. McAfee visits twice a month to mentor young startup founders. Sandler says he is McAfee’s partner at Future Tense Central holding company.
Yes, John McAfee is running for President and Kyle Sandler is a campaign advisor. For those that worry that McAfee’s time at MGT will take him away from his grand ambition of becoming the next POTUS, he reassured those concerned.
Currently trading with a market cap of $27 million, MGT has run up the charts on the back of short covering and an orchestrated promo campaign. According to the email disclaimer from a known website:
We have been compensated for this report/news updates/social media/corporate communications on MGT the sum total of $125,000 from the Issuer (MGT Capital Investments, Inc.) for a two month MGT contract (May 6, 2016 – July 5th, 2016). This compensation constitutes a conflict of interest as to our ability to remain objective in our communication regarding the profiled company.
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Disclosure: We have no position in MGT and have not been compensated for this article.