MGT Capital shares dive after run-up fueled by John McAfee

SAN FRANCISCO (Reuters) - MGT Capital Investments lost a third of its value on Wednesday, putting the brakes on a 1,000-percent surge in the fantasy sports company’s shares that started eight days ago, when it announced flamboyant anti-virus software pioneer John McAfee as its chief executive.

Software pioneer John McAfee is escorted by immigration officers to the Guatemalan Airport in Guatemala City December 12, 2012. REUTERS/Jorge Dan Lopez

Over 96 million shares of MGT were exchanged during the session, more than any other company in the U.S. stock market except for Bank of America. Short sellers shorted virtually all available stock in MGT, which last year reported revenue of just $104,000 and two full-time employees.

MGT’s ascent began on May 9 when it announced it was buying assets from Wyoming anti-spyware company D-Vasive Inc. As part of the deal, MGT said it would make McAfee its CEO and executive chairman. It also said it would be renamed John McAfee Global Technologies.

That the surge came despite a lack of concrete information about MGT’s plans is emblematic of high-risk speculation, traders said.

“You’ve got to be very careful if you’re in a name like this, said Mark Kepner, managing director at Themis Trading in Chatham, New Jersey. “Don’t be afraid to lose everything.”

MGT said that D-Vasive’s smartphone anti-spy technology was a starting point to become a major force in cybersecurity. In an April filing, MGT said its business was acquiring and developing assets in online games and social casinos, and that is had been considering other ways to create shareholder value.

On Wednesday, short bets against MGT totaled about $9 million and there were no additional shares available for new short positions, according to S3 Partners, a financial analytics firm.

“The large brokerages are not going to be doing this trade because it’s not enough market value for them, so this is probably more retail shorting and some smaller professionals,” said S3 Partners’ Head of Research, Ihor Dusaniwsky.

An American who helped create the anti-virus software industry, McAfee generated a media frenzy in 2012 when he fled his home in Belize, claiming that police wanted to frame him for murder.

He is no longer a major player in the industry. Intel bought the company he founded in 2010 for $7.7 billion and has changed the name to Intel Security.

McAfee has said he plans to run for U.S. president in the November election as the Libertarian party candidate.

Tom Kellermann, head of investment firm Strategic Cyber Ventures, called McAfee a security pioneer who has fallen behind in the fast-moving industry.

“His shelf life has expired,” Kellermann said. “He hasn’t been close enough to the threat landscape or the community itself to truly understand the gaps in security capabilities.”

McAfee did not respond to a request for comment but on Twitter he reassured followers that he would make announcements “in a couple of weeks”.

MGT ended down 36.87 percent at $2.62, still up 618 percent from May 6.

Reporting by Noel Randewich, additional reporting by Shailesh Kuber; Editing by Bernard Orr