Noble Roman’s Short-Term Play

This is going to be a quick post on a short-term investment I made. It’s already partially played out (quicker than I expected), but I think there’s more to go. Hopefully some readers can make a quick buck here. Privet Fund acquired just under three million shares (14%) of Noble Roman’s late last year and wrote a letter to the board in November. Privet’s attempts to get active obviously didn’t go well because they started dumping their shares on March 31 and it appears they sold their final chunk last week. NROM is a small ($13 million market cap) illiquid stock so three million shares hitting the market affected the stock in a big way. The day before Privet started selling, NROM was at $0.88. When Privet sold the rest of their shares last week, the stock bottomed out at $0.47.

I believe this price decrease was almost entirely from Privet and not due to any permanent change in the company. NROM’s average daily volume was 34k shares in 2014, 26k shares in 2015, and was 15k shares this year before Privet starting selling. Three million shares hitting the market over three months is massive downward pressure on a stock that normally does 20k shares a day. With the selling pressure gone, I expect the stock to rerate higher to where it was before the selling. Even if it only gets back to $0.75 or $0.80, that’s an increase of 15-23% from the $0.65 price right now. As a quick look at a chart will show you, this has already started with NROM jumping 38% in the past two days.