Axion Power International, Inc. (OTCMKTS:AXPW) Hesitant Under Record-Breaking Volume
When it comes to short-term trades and quick profits, Axion Power International, Inc. (OTCMKTS:AXPW) hasn’t been your best OTC bet over the last couple of years. In fact, it’s been one of the worst. The ticker has been on a downward slope virtually constantly since a brief peak back in 2011 during which it reached values of over $1.20 per share. The drop since May this year has been particularly painful: just five short months of trading have resulted in more than 50% in depreciation. This sort of performance is the stuff of nightmares and looking at the latest SEC filings, we’re not sure what’s causing it.
Many penny stocks lose quite a lot of ground in an extremely short period of time, but most of them are depressed either by the lack of commercialized products and financial stability, or by paid promotions that wreak absolute havoc with the chart movement. The case of AXPW is a little bit different.
They’ve been in the business of developing state-of-the-art batteries using their proprietary technology for quite some time. They have the contracts in place and, looking at recent press releases, things are getting better by the minute. They can also boast about a relatively decent-looking financial statement that lacks the negative working capital and colossal losses that we’re normally used to seeing from small cap ventures that have set themselves the task of creating something revolutionary. Here’s the proof, as found in AXPW‘s latest 10-Q:
- cash: $2.8 million
- current assets: $12.8 million
- current liabilities: $6 million
- quarterly revenue: $2.6 million
- quarterly net income: $86 thousand
Sure, they have just managed to break even during Q2 but even that’s an achievement when you consider the fact that previous periods ended with millions of dollars in losses. What’s more, we read in the 10-Q that between March and June, they have managed to optimize the manufacturing process, thus reducing the manual labor and cutting down on the time needed to assemble the energy storage devices by no less than 80%. AXPW don’t say if the shorter manufacturing time is the reason for the improvement, but they do say that they have managed to increase their gross profit by about 25%, despite the 2% reduction in net sales.
Yet, the ticker is refusing to perform. Yesterday’s session is, we reckon, a good enough example. About half an hour after the opening bell, an extremely optimistic Seeking Alpha article authored by John Petersen (one of AXPW‘s former Directors) appeared, but despite his enthusiasm and despite the record-breaking volume of more than 4.1 million shares, the ticker finished the day below it’s opening value. It still stands around 10% above Monday’s close, but if you’ve been around small cap ventures for long enough, you know that this is not all that much in Pennyland.
The reason for the rather terrible chart movement from the last couple of years might be found in AXPW‘s greatest virtue – their business plan. The technology that they’re developing is still relatively new and it requires quite a lot of investments which means that they’re going through quite a lot of capital in a short period of time. When you open the 10-Q covering the second quarter of 2012, for example, you’ll see that back then, they had $6.3 million in cash, more than twice the current amount.
It’s clear that they still need some extra funding and, as we mentioned in our previous article, the convertible notes issued in order to raise it are, apparently, not what investors want to see. The recent increase in the number of authorized shares and the likely dilution that will follow is probably also playing a part in deterring some people who want to get in for the long run.
That’s why, despite the evident signs of progress, the risks are still there. You might want to trust AXPW and wait for a true breakthrough that will propel the ticker towards the skies, but even if you decide to do that, you should be sure that you can afford losing a large part of your investment. On the bright side, at least for the time being, you won’t need to worry about AXPW becoming the target of a promotion, which is more than can be said about the people invested in Ehouse Global, Inc. f/k/a Veterans In Packaging Inc (OTCBB:EHOS).