CEO Conway Just Sold $120,000 Of His Stock On The NASDAQ, At $6/Share

And -- to be clear -- there are only nine trading days left in the quarter (at the point he is disclosing this open market sale, to the world). He lists the sale date as September 13, 2012, though. That is extremely close to the time when he might know how the quarter is turning out. Some 75 days -- of 90 -- are already in the books. He must know of every new contract signing. The proof (as with the General Counsel's NASDAQ sales, last week) will turn on whether the stock is higher than $6, or $6.15, when Q3 2012 results (GAAP losses per share, actually) are announced -- or lower. Seems a decidedly foolish gamble to take -- unless one had no other more prudent option.

Here is the SEC Form 4 he just filed.

He's the CEO. And he couldn't think of a better way to raise cash -- a measly $120,000 worth?

I'll have a more relevant image, and More commentary -- shortly:

UPDATED: Mattersight stock is off about 5.4 percent this morning on the NASDAQ -- the first trading session after disclosure of CEO Conway's end of quarter open market sale. Eight sessions left in the quarter. Sheesh.

If He EVER Builds It (NPS®)... Will Anyone Come? I Dunno...

A month ago, I snarkily mentioned that Mr. Conway (after a misfired press release) re-announced in a corrected press release that Mattersight was selling something called NPS^®, or Predictive Net Promotoer Score^® Analytics. The theory -- it seemed -- was that customers of Mattersight would pay twice for the same thing: once, for a Behavioral Analytics^TM rundown of call interactions, then a second time, for a so-called NPS analysis -- one that ostensibly predicted how accurately that BA analysis matched an actual survey of the customers' experience -- but without doing the survey.

Okay -- that was the concept -- I gather.

Not long after, CEO Conway announced that Mattersight had signed a "top five" property and casualty insurer in the US -- as a customer for NPS. I dutifully ignored it -- figuring that they were big boys, and could figure out soon enough that Mr. Conway was only selling a self-reinforcing feedback loop here.

But just last night, I noticed that the Mattersight press release announcing the signing actually only says that Mr. Conway "will build" an NPS analytical tool for the insurer customer. So -- it is, definitively -- at the moment, wait for it. . . yep, vaporware.

I am shocked. . . shocked that Mr. Conway is selling vaporware to distract from a flat to down sales trendline -- in 2012 (and slightly rising expenses -- again!). Just shocked.

What is crazy is that the public shareholders stand for it -- for nearly 13 years running. That is jaw-slacking.

It's Very Late In The Quarter, For An "Executive Insider" To Be Open-Market Selling, IMHO. . .

To be certain, it may all be innocent enough. The proof in the pudding will come when Mattersight's stock rises -- or falls -- as Q3 2012 results are announced in about 40 days' time, now.

After the market closed tonight, the General Counsel and Vice President of Mattersight filed an SEC Form 4, disclosing that prior to the weekend, she sold 4,000 shares into the open market, at $6.15.

That may not seem unusual, to the untrained eye. However, there are only 14 trading days left in Mattersight's third quarter. At many (perhaps most) public companies, high-ranking insiders, like the general counsel, are "locked out" from NASDAQ trading within ten days of the close of a quarter -- as a precautionary policy. The thought is, that with some 75 to 80 of the 90 days of the quarter already in the books, executives will already have a pretty good sense of where the "rolled-up" quarter is likely to finish. If Ms. Carsen's trade has not netted her a significantly higher price than that prevailing on Q3 2012 post-announcement morning, she is definitively in the clear. If, on the other hand, $6.15 turns out to be a high water mark for the next 90 or so days, she may well come in for criticism -- as the question would be whether she knew the quarter was so soft that it would cause a NASDAQ price decline on announcement.

So now we wait -- and watch. But I do wonder whether Mattersight has a "closed window" policy for its executives, as the quarter roll up begins. If it does not, Ms. Carsen might again be criticized, for not having one -- since all SEC compliance decisions presumably fall to her office, as a matter of policy, at Mattersight.

As ever, be careful out there. [I do note that Sutter Hill Ventures was a Mattersight buyer, at $5.40, only one day before her sales began. Moreover, her selling price was about 15 percent above where a very savvy inside/control affiliate (at 17 percent of outstandings) investor was last a willing buyer. Interesting.]

New Sutter Hill SEC 13D Shows Increase; But Longer Term (Since 09.2008): Decreasing Percentages Held

To be sure, the entities affiliated with Sutter Hill Ventures still hold a very substantial stake in Mattersight, and to be equally sure -- the Sutter Hill folks were the large purchasers this past week. . . but that doesn't begin to tell the whole story. No, we need to use the longer telescopic lens -- and look back in time, now. . .

And when we do look backward, to September 22, 2008 (pre-meltdown) -- see page 44 of this SEC Schedule 13D -- when what is now Mattersight was called eLoyalty Corp, we see that both the Sutter entities, and Tench Coxe individually (as well as most other affiliated entities and persons), controlled a larger percentage of the company's outstanding shares, than they did at September 6, 2012 (see page 19 of this just-filed SEC Schedule 13D).

While we cannot be certain here, it would seem that over time, Sutter Hill is trying to reduce its overall position in Mattersight -- even as it is the buyer of the moment.

The key question, though -- is from whom was Sutter Hill buying, on the open market this past week? That we may never know. [Was it a vast, but uncoordinated, series of holders, turned into sellers -- disappointed by the GAAP "errors" restatements, and the downturn in sales growth, here -- quarter to quarter? Who knows?]

As ever, be careful out there. [For completeness, I should note that this other blog (published through SeekingAplha) lists recent buys, but provides no historical perspective -- and that could be part of the short-term run-up in Mattersight's NASDAQ prices.]

A Previously Unexamined Connection -- PureStorage And Mattersight, Via Sutter Hill Ventures

I noticed last night that a financial blogger had commented on Sutter Hill Venture's continuing purchases of Mattersight common stock, on the NASDAQ open market. Sutter Hill, of course, was founded by the great William H. Draper, III, son of General Draper (think Draper, Gaither) -- and the Sutter Hill name holds founding or follow-on stakes in a long list of Silicon Valley legends.

So -- it is not a huge surprise to learn that Sutter Hill Ventures also is a very significant investor in privately-held PureStorage. I came to know this, solely because pure storage just completed another $40 million equity round, in which Sutter Hill Ventures affiliates participated.

Then I remembered that Mattersight made a very large capital purchase of flash storage arrays from the very same PureStorage, just about two months ago. Flash storage is -- at the moment -- significantly pricier than conventional mechanical disk storage, per terabyte. At the time, the CIO of Mattersight said that he needed the speed of PureStorage's flash arrays. [And, in closing the $40 million investment a few days ago, PureStorage officers said ". . .It has certainly been a tumultuous year: Every month it seems a new flash storage product and the associated marketing hype join the milieu. . . . To successfully separate the signal from noise, you only need convictions about what really matters. . . ." Interesting. Why exactly did Mattersight select PureStorage, then?]

Now I am beginning to wonder -- since we have established that the Behavioral Analytics output cannot be delivered in anything like real-time, why is the speed increase so compelling that Mattersight would pay bleeding edge prices for it?

Is it possible that Mattersight (as a decade-long dead money posiiton for Sutter Hill) is being used to accept, and capture, continuing losses -- and thus transfer revenue, and eventually net income, to Sutter Hill's more promising investments -- ones like PureStorage?

I don't know -- but the terms of that purchase ought to be examined by the auditors and the SEC -- at least insofar as the public's money is at stake, as sharehlders of Mattersight.

It might well be that PureStorage offers such a compelling solution that Mattersight would have selected it independently -- even without the overlapping Sutter Hill stakes, but the SEC rules do require that sort of an analysis (under Reg S-K) from Mattersight's auditors, in this situation.

Let's see what the third quarter Form 10-Q has to say on the subject, in about two months' elapsed time.

Was The Registered Reseller Active On August 22, 2012?

We will have to wait to see (SEC Schedule 13 filings take a while, for smaller holders) -- but at 100,000 shares of NASDAQ volume, that was about seven to ten times the normal average daily trading volume.

What was going on there? It's been over a week, and I've seen no mention in any SEC-filed document -- though it ought to be in a Schedule 13 soon -- if it was one seller -- or an organized group of sellers.

I'll try to find out.

Be careful out there.