Bulova Technologies Group, Inc. (OTCMKTS:BTGI), the business conglomerate, has seen its stock become one of the biggest winners in 2017. At the end of 2016, the shares were exchanged at $0.0017 per share. Right now, after the most recent jump that occurred on June 15, 2017, traders are paying $0.0058 per share. That is a more than 240% return. Have a look at the price action.SourceHow do we explain the most recent spikes in the share price?Let's give some information about the company for those who are hearing about it for the first time. Bulova is a group of companies operating in different sectors. The most well-known business entities of the group include Bulova Technologies Group, Inc., Bulova Technologies Europe LLC, Bulova Technologies Machinery LLC, Bulova Technologies Finance LLC, and BT-Twiss Transport LLC. The company's main office is located in Largo, Florida. The group operates providing munitions, weapon systems, and combat systems for the defense industry. It also designs and sells precision CNC machining centers, such as the one that you can see in the following figure. The company is also in the trucking business with over 105 trailers and 90 trucks.SourceOn June 5, 2017, it was put out that the company had decided to discontinue the operations of Bulova Technologies’ Healthcare Products LLC; a wholly-owned subsidiary of the holding company. Furthermore, it was noted that the "remaining inventory has been consigned to a third party marketing group". Stephen L. Gurba, President, and CEO, said the following about this strategic move:
“We are continuing our plan to focus on the transportation business, where we believe we can best have a positive impact on our revenue. With this latest corporate action we will free up resources for our principal business.” Source
Additionally, on June 2, 2017, another similar news was released. BTGI announced the dissolution of Bulova Technologies Compliance & Security LLC. The press release stated that the company intends to focus from now on on its transportation business. Stephen L. Gurba said the following about this other strategic decision:
“With this corporate restructuring, we have chosen to focus our assets and energies on our transportation business where we believe the most promise lies for the Company. We intend to be very active in this segment and anticipate additional growth in the very near future.” Source
How did the share price react to this divestment?Usually, corporate restructuring news are well regarded by market participants, as companies become more efficient. Also, sometimes the sale of divisions bring cash to companies. It seems that this case is different. The share price did not jump on the news. In our opinion, the market is discounting the efficiencies this brings to the company.
Day traders needed to wait until June 15, 2017 to see large volume and a big spike.The reason?Like it happened before, the reason was a letter of intent to acquire a business. Bulova announced its intention to acquire Big Red Transport, Inc.; a trucking company with 27 trucks, 38 refrigerated trailers, and based in New Jersey. The press release also mentioned that the deal would add 38 new customers to the trucking division of BTGI. The CEO explained it with the following terms:
“The acquisition of Big Red is a welcome addition to the Bulova Technologies family of transportation companies. Big Red, with hubs in both Netcong, New Jersey and Chicago, Illinois, will complement our transportation companies by providing us with a Northeast and Midwest U.S. platform and ensure the increased efficiency of our current fleet. I anticipate that this transaction will be completed by July 15. This will increase profitable sales in our transportation division by 12 million annually.” Source
Hence, of course, this time market participants recognized the value of the new information and pushed up the share price. The news noted that the company is confident about the future, and is betting on growing in the trucking sector. The story does not end here, as the acquisition is not yet completed. This is an LOI, which means that the two parties involved noted their interest in a transaction and mentioned some conditions. However, the final transaction contract has not been written yet. Thus, some more negotiation is needed. Is this an opportunity? Well, yes, given the share price reaction to this announcement, we believe that market participants may push the share price again when the deal is completed.ConclusionWe received several news items about BTGI and we made an assessment based on them. The restructuring process was not very relevant, as the value of the businesses being liquidated or sold was not that important. The share price did not react to this news. Conversely, the company announced its intention to purchase another trucking company, and the market did react to it. It makes a lot of sense, as the new deal will increase the amount of trucks owned by 30%, and will increase the amount of trailers by 38%. We noted that email subscribers need to be alert on this one, as the deal is not yet completed, and news on this transaction could make the share price rise even more. For fully understanding of the next company moves, we encourage market participants to read our complete coverage on this stock.We will be updating our subscribers as soon as we know more. For the latest updates on BTGI, sign up below!Image courtesy of FlickrDisclosure: We have no position in BTGI and have not been compensated for this article.
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