Olathe company’s stock jumps 14 percent and the experts don’t know why

Olathe-based NIC Inc. isn’t a household name, though it built and runs websites that allow residents of Kansas and many other states to renew driver’s licenses and conduct other state business online.

This week, the company got Wall Street’s attention as its shares jumped more than 14 percent. Shares had finished Friday at $16.35 and were trading at $18.50 Wednesday, after reaching $18.75 earlier in the week.

The jump has left management and investment experts shrugging their shoulders.

“We are not aware of any news that would be the obvious catalyst for this move,” investment analyst Pete Heckmann wrote in a note Wednesday to clients of D.A. Davidson. “We have also compared notes with management and they are not aware of any publicly available news that would account for the recent activity.”

NIC’s stock, which uses the ticker symbol EGOV, caught the attention of CNBC’s Halftime Report as well. Show host Scott Wapner noted that EGOV was a ticker he didn’t recognize as one the show had talked about before.

The analyst acknowledged that and offered a quick nod to the nature of the business. Then, this about NIC’s financial results:

“They have been beating it every quarter. The last two quarters they have out performed both on sales and on bottom line.”

His analysis was about options on shares.

Heckmann has followed NIC for many years and noted that there could be some developments that just haven’t gotten out publicly.

Texas, the company’s biggest client and source of 20 percent of its revenues, is seeking bids for an update or renewal of its website for citizen business. Maybe, Heckmann wrote, some information about that situation had leaked.

Heckmann also speculated that perhaps there is a bid request from “a new state or a federal agency” that could fall within the company’s interest and has drawn bidding to NIC’s shares.

Finally, Heckmann wrote, the sharp increase in NIC shares may have stirred second thoughts by investors who have been betting against the company’s stock by shorting its shares.

Short sellers borrow a company’s shares from a stockholder and then sell them in the market. Eventually, the short seller has to buy the same number of shares to return to their owner.

NIC’s stock surge makes that buyback more expensive and erodes profits of, or creates losses for, short sellers.

This story was originally published December 13, 2017 at 11:59 AM with the headline "Olathe company’s stock jumps 14 percent and the experts don’t know why."