RadioShack got a nice stock market bounce Tuesday after disclosing that several directors and executives made major stock purchases last week shortly after a big dip.
Shares in the struggling Fort worth-based electronics retailer (ticker: RSH) closed at $2.91, up 37 cents or 15 percent, after it was reported that officers and directors bought 220,000 shares Friday.The insider stock purchases came two days after RadioShack's stock value plunged 30 percent in one day when it reported a $21 million quarterly loss and announced plans to suspend its dividend.RadioShack officials did not respond to a telephone call or e-mail seeking comment on the stock purchases.Robert Abernathy, a director who is an executive with Kimberly-Clark Corp., made the biggest purchase, 100,000 shares, according to filings with the Securities and Exchange Commission.Directors buying 20,000 shares were Julie Dobson, chairwoman of Telebright; Frank Belatti, managing partner with Equicorp Partners; Jack Messman, now a consultant; and Daniel Feehan, CEO at Cash America and RadioShack's chairman. Director Edwina Woodbury, CEO of Chapel Hill Press, bought 15,000 shares.Dorvin Lively, who is chief financial officer, bought 25,000 shares.Investors could see the purchases as a sign that the officials believe in the company's prospects and are themselves investing at bargain prices. But it could also be a short-term buying strategy aimed at propping up the share price.Meanwhile, debt investors seem to have little faith that RadioShack can be turned around and stay out of bankruptcy, Bloomberg News reported.Trading in derivatives linked to RadioShack debt implies that the company has an 87 percent chance of default within five years, Bloomberg reported, a level hit by Eastman Kodak and AMR Corp. within six months of filing for bankruptcy.Prices on RadioShack credit-default swaps have been rising since January, when they indicated a 50 percent default risk, and jumped after the company reported a second-quarter loss last week.Investors are concerned that RadioShack may burn through its $517.7 million in cash as competition from online and discount retailers squeezes margins."The market seems to be saying it is surprised that the company has continued to survive," said Melissa Weiler, managing director at Crescent Capital Group.Staff writer Bob Cox contributed to this report.Have more to add? News tip? Tell us
