Guardion Health Sciences Inc (NASDAQ: GHSI) is screaming for the top in the market this morning, squeezing the shorts out of their positions and leading to a running of the bulls. With no press release, many are wondering what’s the deal?
The gains seem to be the result of a Form 3 filed with the SEC by Bret Scholtes, the company’s CEO. Here’s what’s happening:
Skip to What You Want to Read
- Bret Scholtes Files Form 3 With the SEC
- Why Investors Are Excited
- Risks to Consider Before Buying GHSI Stock
- Final Thoughts
Bret Scholtes Files Form 3 With the SEC
As mentioned above, Guardian Health Sciences stock is climbing in the market this morning after the CEO of the company, Bret Scholtes, filed a Form 3 with the United States Securities and Exchange Commission.
The Form 3 is also known as the “Initial Statement of Beneficial Ownership of Securities.”
Essentially, this means that the filing entity acquired shares of the company in one way or another and is announcing their beneficial interest in the stock. In this case, the CEO of GHSI announced a total beneficial, direct ownership of 1,016,900 shares of GHSI stock.
Considering the fact that GHSI trades with a float of about 85 million, this ownership represents a meaningful percentage of the company.
Why Investors Are Excited
It’s always a good thing when the CEO of a company owns shares of the company he oversees. Afterall, when this is the case, moves that are made in the best interest of the company’s investors are ultimately in the best interest of the CEO of the company.
As such, it’s a general belief that when the CEO has skin in the game, his interests will align well with those of the general investing public.
In this particular case, prior to the Form 3, GHSI traded with a relatively small float and relatively high short interest. As a result, when the CEO of the company announced that he had plenty of skin in the game, investors cheered, sending the stock for the top.
As the stock started to tick upward, shorts in the stock began running for cover. That’s market-speak for buying shares of stock to return to those they borrowed from in order to take out their short positions.
So, not only do we have a CEO with interests that are aligned with investors, we have short sellers flocking out of the stock, leading to dramatic gains.
Risks to Consider Before Buying GHSI Stock
If you’re going to invest, you’re going to accept risk, it’s just part of the process. While Guardian Health Sciences stock is ticking up as the CEO of the company aligns his interests with those of investors, the investment is not without risk. The most significant risks for investors to consider include:
- Penny Stock Risks. GHSI is a penny stock. That means that the stock is riddled with volatility and the company’s business model is largely unproven. As a result, the stock comes with the general risks seen among other penny stocks.
- Profitability Concerns. Guardian Health Sciences does generate revenue through the sale of products. However, that revenue isn’t enough to cover the costs of operations. At the end of the day, if the company can’t find its way to profitability before the well dries on its balance sheet, it will likely raise funds through the sale of newly issued shares, diluting value for existing shareholders.
While there are risks to consider when making an investment in GHSI, the stock is one to watch. With the CEO’s interests falling in line with those of investors, there’s likely quite a bit to look forward to ahead.
Generally, shortly following a CEO taking interest in their own stock, we tend to see significant announcements that act as further catalysts, sending the stock higher. As such, I’m expecting for positive news to begin breaking around GHSI in the near term, leading to more dramatic gains ahead.