What happened
With the S&P 500 is inching higher today, it seems that markets are poised to end the week on a bullish note. But there's little doubt about how the trading week will end for The Metals Company (TMC -4.73%). Investors are enthusiastically clicking the buy button on the deep sea mining stock after discovering that a key insider has made a significant purchase of company stock.
As of 1:08 p.m. ET, shares of The Metals Company are up 8.6%, having retreated from their earlier rise of 24.1%.
So what
Andrei Karkar, a member of The Metals Company's board of directors, bought 3,997,519 shares of the company's stock in a transaction valued at nearly $3 million.
Investors are sitting up and taking note of Karkar's purchase because it's a strong indication that he's bullish on the company's prospects. The company is in the pre-revenue phase of its development, and there is no guarantee that The Metals Company will proceed to generate sales.
Innovating in the field of mining, The Metals Company is focused on procuring polymetallic nodules -- masses of minerals -- from the seafloor and transforming them into battery-grade metals, including cobalt, nickel, and copper.
Now what
While insiders may have a variety of reasons to sell stock -- beyond the belief that it will tumble -- the motivation to buy stock is undoubtedly tied to the belief that shares will rise. It's unsurprising, therefore, that the market is following Karkar's lead and buying shares themselves today.
But the company's success is not a guarantee. There are numerous risks that the company still faces in disrupting the mining industry; consequently, investors should still exercise caution when considering the stock.
