- NYSE declined to list shares for MGT’s planned acquisition
- Share surged sevenfold in May after announcing McAfee hiring
Gravity is catching up with John McAfee’s MGT Capital Investments Inc.
The penny-stock success story, which surged sevenfold after hiring the cyber security guru in May, just slumped 42 percent over two days, capped after the New York Stock Exchange refused to list shares for a planned merger. Its market value is $48.9 million, down from $104 million on July 7.
The decision put a damper on the Harrison, New York-based firm’s plans to acquire D-Vasive Inc., sending MGT’s stock down 25 percent to $1.89 on Tuesday. The drop compounded the company’s 23 percent decline on Monday sparked by a subpoena from the Securities Exchange Commission requesting “certain information.”
It’s been anything but a smooth ride for MGT, which added $90 million in market value in May after saying it would hire McAfee as chief executive to aid the transition from video-game maker to cybersecurity firm. The stock showed remarkable resilience in the following weeks despite the company not generating any revenue -- never dropping below $2.24 a share -- until selling this week sent it tumbling.
“We are determined to consummate a transaction that brings our cybersecurity technologies to market in order to solve the pressing privacy and security issues that society faces,” McAfee said today in a statement.
MGT intended to issue 43.8 million shares to acquire D-Vasive, which would almost triple the number of MGT shares outstanding. The listing of new shares to acquire a private company could require the issuer to meet the same requirements needed for a first-time listing, according to the NYSE website.
NYSE spokesman Brendan McManus declined to comment on the decision to reject the proposed share issuance.
The stock has been a battlefield of fans and detractors of MGT, with bulls pointing to McAfee’s hiring and the pending acquisition of D-Vasive, a Wyoming company that MGT says is developing “anti-spy” applications. Meanwhile, bears pushed short interest on MGT’s stock to the highest in history in late July. The measure is still more than double its two-year average.
This isn’t the first time in recent weeks MGT’s plan to capitalize further on McAfee’s name has run into issues. McAfee earlier this month sued Intel Corp. for the right to use his name in new ventures, saying Intel warned him that any use of his name will infringe on the company’s trademarks that it acquired when it bought his company in 2010, according to his complaint in Manhattan federal court.
MGT plans to rename itself John McAfee Global Technologies.
On Monday, MGT received a subpoena from the SEC requesting information from the company. In a statement, the MGT said in a statement that it has “no indication or reason to believe that the company is or will be the subject of any enforcement proceedings.”
Current CEO, Robert Ladd, when interviewed by Bloomberg earlier this month, wouldn’t provide any details of MGT’s planned business beyond saying it intended to develop its own technology. He declined to comment about the NYSE’s decision to block MGT’s share listing.