Another Day, Another Pump for Smack Sportswear (OTC:SMAK)
The first email that we received about Smack Sportswear (OTC:SMAK) is dated December 12, 2012. Since then, our database has been filled with more than a hundred emails from all sorts of promoters. The content has been pretty much the same – optimistic revenue projections, TV and radio appearances etc. The same thing can be said about the announcements that have been coming out of SMAK‘s HQ for the last months. On the whole, it’s been quite an aggressive awareness campaign. So, what’s the result when it comes to share prices?
They closed the first day of promotion on December 12 at $0.47 which is quite a lot. Yesterday, however, they stopped at just $0.085 – in other words, a loss of over 80%. While there were some peaks, during the constant PR frenzy, the people who trusted the emails and jumped in with their minds set on a long term investment are probably quite angry right now.
We have seen a lot of tickers perform poorly under the pressure of a promotion, but the worst thing about the whole affair is the fact that unless the pumped company has established a solid stream of money, they will have even more difficulties getting back to their feet once the emails stop. Unfortunately, SMAK are far from the profitable business that pumpers and press-releases would have us believe. During the first three months of promotions we had to rely on their financial statement for the third quarter of 2012 and we mentioned numerous times that it doesn’t look good. A few days ago, they published a new 10-Q for period that ended on December 31 and, although they are finally generating some revenue, it still looks pretty dismal. Here are the most important financials:
- cash: $6 thousand
- current assets: $625 thousand
- current liabilities: $753 thousand
- quarterly revenue: $324 thousand
- quarterly net loss: $111 thousand
These figures look quite underwhelming when you consider the projections that we saw in the press-releases. That’s the biggest problem that we have with SMAK – during the last three months, they seem to have been more focused on getting as much publicity as possible. While being in the spotlight is not, by any means, a bad thing, the management team should always be more focused on raising the value of their shareholders.
Unfortunately, with a net loss of $111 thousand and only $6 thousand in the bank, this won’t happen and we’re pretty sure that TV and radio appearances won’t do the job, either. That’s why, no matter how much awareness is generated through the emails and PR’s, unless SMAK can turn a profit, the price will continue to fall. And the only thing that the new round of pumps could do is speed things up.
The same goes for Face Up Entertainment Group, Inc. (OTC:FUEG) who, just like SMAK have appeared in more than 100 promotional emails during the last couple of months. As you can see from the chart on the right, they have been struggling as well.
It’s always important to weigh the risks carefully before investing in a penny stock company. The risks are generally higher with small cap businesses and when it comes to promotions, even though things might look very promising, they could still end up disastrously wrong.