The stock of Marin Software Inc. (MRIN) recently made an intraday gain of 100%. On October 23, 2020 the stock opened at $2.35 and hit an intraday high of $4.70 before closing back down at $3.45. We’ll take a look at the software company’s financial filings to see if there was any news to support such an impressive move.
As an initial step we’ll search FloatChecker to get an idea of the available shares in the float. Looking up MRIN on FloatChecker tells us it’s a low float stock with between 4.47 million and 6.56 million shares available for trading.
- MRIN Recent Quarterly Report 10-Q and Equity Plans
- Beneficial Owners – Schedule 14A Proxy Statement
- Second Quarter Preliminary Financial Results
MRIN Recent Quarterly Report 10-Q and Equity Plans
The front page of Marin Software’s Quarterly Report, filed August 11, 2020, indicates that the company has 6,963,000 shares of common stock outstanding as of August 4, 2020. Some portion of those shares will be restricted while the remaining shares that are open for trading will constitute the float.
Note 7 to the 10-Q Report discusses Marin Software’s Equity Award Plans, including Stock Options and Restricted Stock Units (RSUs). In 2013, the company adopted an equity incentive plan that replaced a prior stock option plan that was adopted in 2006. The stock option table shows that 435,000 shares remain in the 2013 plan. Those shares are reserved as future compensation for employees, executives and directors. Subtracting that number from the outstanding shares (6,963,000 – 435,000) leaves us with 6,528,000 shares in the float.
The 10-Q also sets out the number of granted and unvested RSUs. These types of shares are issued to employees and will usually vest based on some kind of performance milestone or metric. Once vested, they can be sold at the discretion of the employee. The RSU table shows that 863,000 shares have been granted and are unvested. Subtracting that number from our calculations gives us a remaining float of 5,665,000 shares.
Finally, Note 7 of the 10-Q sets out the shares remaining in the Employee Stock Purchase Plan (ESPP). An ESPP allows qualifying employees to purchase shares of a company at a discounted price, usually through payroll deductions. Shares that are purchased can then be sold by the employee. Marin Software states that it has reserved 195,000 shares for issuance under its ESPP. Continuing with our calculation and subtracting that amount leaves us with a low float of 5,470,000 shares.
Beneficial Owners – Schedule 14A Proxy Statement
Let’s quickly look over the beneficial owners table provided in the most recent Schedule 14A proxy statement filed April 16, 2020. The proxy statement is sent out to shareholders to inform them on matters of the company that need to be approved. The proxy usually gives a summary of executive compensation and beneficial ownership.
As the table shows, nearly 25% of MRIN shares are held by 3 entities and another 9% are held by executives and directors. Owners that hold 5% of the outstanding shares are required to file either a Schedule 13D or 13G ownership record which sets out the reasons for their investment. Such beneficial owners are also required to amend these forms if their ownership changes by 1%. The lack of such recent filings may suggest that these owners are still holding their shares. But we would need to review the Schedule 13 filings to better understand whether the shares are under any restrictions.
Second Quarter Preliminary Financial Results
On October 26, 2020, Marin Software issued a press release announcing revenue results for the quarter ending on September 30. The company reported that its net revenues were down $6.8 million versus $11.7 million at this time last year due in part to the Covid-19 pandemic. Importantly for investors, Marin Software’s CFO issued guidance suggesting lower revenues between $6 and $6.5 million for the next quarter. In addition, on August 12, 2020, the company issued an 8-K explaining that several executives would be reducing their base salaries by 20%. These actions, combined with the lower guidance on October 26, likely did not give investors the confidence to sustain the rally in MRIN stock on October 23.
The 100% intraday gain in MRIN stock was likely fueled in part by day traders who were attracted to the stock’s low float. Our estimate of a 5.47 million share float fell within the spectrum of results reported through FloatChecker. We will note that the company filed a S-3 shelf registration statement on March 14, 2019 allowing it to offer shares to raise up to $50 million. Once issued, the outstanding shares and the float will surely change. But it doesn’t appear any such shares have been issued recently. Lastly, some traders may have been buying the stock in anticipation of the earnings news on October 26. Unfortunately, the Covid-19 pandemic seems to have hurt Marin Software’s bottom line and management expects that to continue in the near term. While the one-day gain was certainly impressive there was little news to justify continuing the rally. Let’s hope 2021 works out better for everyone.