MERC

Mercer International ($MERC): Major Shareholder's $523K 'Contrarian Buy' Amid 58% Stock Plunge... Bottom Signal?

07/10/2025 05:34

Mercer International ($MERC) shares have plummeted 58% over the past year, yet sustained insider buying activity is drawing investor attention. Notably, major shareholder Peter Kellogg's recent large-scale purchases may signal significant investment opportunities at current price levels. Mercer International is a global pulp and lumber products manufacturer headquartered in Canada, operating pulp mills in Germany and Canada. The company produces bleached and unbleached kraft pulp, wood chips, and electricity, exporting products to approximately 30 countries worldwide. While classified as a small-cap stock with a market capitalization of $362.4 million, the company is recognized for its stable business foundation within the industry. The most notable development is major shareholder Peter Kellogg's consecutive purchases. Between June 6-10, 2025, he acquired 142,020 shares across three transactions totaling $523,543. His average purchase price ranged from $3.62-3.72 per share, representing a substantial investment at current price levels. These indirect purchases through legal entities suggest strategic positioning. Management's buying pattern is equally noteworthy. In September 2024, when shares declined from the $5-6 range, CEO Juan Carlos Bueno Estrada made consecutive purchases. He bought 7,800 shares each on September 13 and 16, totaling 15,600 shares under a 10b5-1 trading plan. CFO Richard George Short also purchased 6,000 shares during the same period. Insider buying continued into 2025. As shares fell to the mid-$3 range in May, several executives made purchases. Officer Wolfgang Beck bought 8,791 shares at $3.50 per share, while COO Carsten Merforth acquired 7,000 shares at $3.62. In June, President Estrada Bueno purchased 8,000 shares at $3.77, maintaining the buying momentum. Despite persistent insider buying, shares have experienced steep declines. Starting from $8.67 in June 2024, the stock has fallen to approximately $3.60 as of July 2025, representing a 58% drop. The stock rebounded to $7.89 in February 2025 before falling again to $3.29 in May, demonstrating extreme volatility. Poor earnings performance has been the primary driver of the decline. Q1 2025 results showed a loss of $0.33 per share, significantly worse than analyst expectations of -$0.15. Revenue also declined 8.4% year-over-year to $506.97 million, missing the $508 million estimate. Consequently, analyst price targets have been reduced from $7.25 to $5.25. Broader industry challenges have also pressured the stock. Global economic slowdown has reduced demand while raw material cost pressures persist. The 2024 Canadian rail strike particularly disrupted supply chains across North American industries, with estimated daily economic losses of C$341 million. However, sustained insider buying suggests significant value at current levels. Major shareholder Peter Kellogg's $500,000+ investment appears to be more than portfolio rebalancing—it reflects conviction. Management's commitment of personal funds demonstrates confidence in the company's long-term prospects. Key factors to monitor include H2 2025 earnings improvement. Pulp price stabilization and cost reduction efforts could drive share price recovery. Additionally, global economic recovery and increased pulp demand could accelerate performance improvement. Investors must carefully weigh the conflicting signals of strong insider buying against earnings weakness at current levels. While insider activity provides positive momentum, structural industry challenges and uncertain timing of performance recovery remain risk factors.