If your interest in stocks crave fast growth, then this is not that. Nor do we have here  obvious undervalue- then keep on walking. But if your tastes run to “hitting a home run” with almost all the risk squeezed out, then have we got a girl for you.

At first let me warn you- the story is very disheartening and negative, and can make a grown man cry, But let me tell you the backstory and see if you can get on board.

The story begins with a press release announcing the Tile Shoppe opening its 12th store in Chicagoland area this on the heels of a November opening in Lee’s Summit, Missouri taking the total of stores to 142 in 31 states. Typical size Is about 20000 square feet carrying about 6000 high quality tile and stone designs. Stores employ interior designers offering guidance in selecting, designing and ordering accessories for each individual job. This not to be confused with the typical commodity tile shoppes where the customer is on his own-(i.e. Home Depot, Lowes). Items generally are higher quality attracting decorators for both new building and remodels.

Unfortunately, October brought with it a decline of 3.7% quarterly sales reporting $85.9 million compared to $89.2 million in comparable period while eps was $(.03) vs $0.05. Latest 9 months showed $261 million compared to $273 million-with 0.00 eps compared to $0.22. Long term debt increased to $63 million compared to $53 million. Management attributed much of the shortfall to a new mishandled POS computer install which we learnt has been remedied.

On the on the heels of this report, management suspended the dividend, cancelled a share repurchase program, cancelled its quarterly conference call, and announced plans to delist shares from Nasdaq and deregister its common stock. These actions pummeled the stock down some 70%-not too surprising with all that bad news. Institutions now were required to sell their positions since timely filings where off the table.

But out came two respected insiders scooping up over 6 million shares and as they are directors they would seemingly know a bit about the goings on in the Tile Shop. Peter Kamin, the better known of the two (think ValueAct Capital), purchased over 2.77 million shares during the Sept thru Nov period bringing his holding to 3.25 million. Peter Jacullo, the second director, purchased over a similar period some 2.6 million shares and now holds 3.65 million shares. It should be noted that total insider holdings are now 35%.

Kamin is considered a successful money manager buying stakes in companies which are periodically followed by management buyouts and/or tender offers. His past history obviously not lost on the company prompted a standstill proposal to the company not to purchase any new shares of the company’s stock.

But what is notable about the proposed standstill Is that any restrictions “…do not prohibit any directors from directly or indirectly making an offer to acquire, and/or consummating the acquisition of, all of the issued and outstanding shares of the Company’s common stock pursuant to a merger or other agreement entered into with the Company in compliance with applicable that is approved by a majority of the members of the Board not including any directors of the Company participating directly or indirectly as an acquiror in such an acquisition and the holders of a majority of the shares of the Company’s not including the shares beneficially owned by the director making the offer, his affiliates or any other party participating directly or indirectly as an acquiror in such an acquisition.

So now let us try to put this together.

The company under the umbrella of a computer problem and sales slowdown, created a shit storm for shareholders by killing buybacks, dividends and going dark- all obviously not shareholder friendly. The resultant purge in price and holders probably squeezed out almost all the risk in the stock. Not lost on the directors, who one would think knew the company, came in and scooped up millions of open market shares.

So, if we believe in the dictum of “follow the money” and that “the past is prologue”, we have several ways to get “lucky”. Will we see a merger agreement, acquisition, tender? Hard to say. But with bright seasoned pros with their money on the line placed after a major selloff, we like the odds.