Although enthusiasm towards the Bitcoin cryptocurrency was at an all-time high at the start of the year it was nowhere near the massive proportions of the marijuana hype. Still, a couple of pennystocks decided to switch their business and focus on the unregulated virtual currency. Bitcoin Shop Inc. (OTCMKTS:BTCS) was one of them and for a while everything seemed to be working out great.
They left behind their touch screen business, changed their name from TouchIt Technologies Inc to Bitcoin Shop and acquired the new ticker BTCS
. Then a reverse merger was executed with the private company bitcoinshop.us, LLC causing such a strong response from the market that in just four sessions BTCS
stock rose from $1.25 to more than 5 dollars.
Unfortunately for all those who jumped right into the stock the serious red flags around the company and the extremely negative developments around the bitcoin currency itself put a rather swift end to BTCS
‘s climb. On April 17 the stock dropped down to its lowest point for the last 52-weeks at just $0.136, representing a loss of 97% compared to the previous highs.
Last week though BTCS
started to tentatively recover and with each session the positive momentum picked up more and more speed. On Friday they rose by more than 32% and closed at $0.357 per share. Even more impressive was the traded volume for the day that reached the record 3.86 million shares. Now the question is – can the stock return to its previous price ranges above the dollar mark? Well, we have our doubts.
As part of the reverse merger the company performed a 1-for-300 reverse split that turned their 228 million outstanding shares into 761 thousand. But now close to three months later that number has risen to 124 million. For now investors shouldn’t worry for around 100 million of them being dumped on the market because those shares are under a lock-up agreement for 18 months. What they should worry about though are the 400 thousand preferred B shares that are held by note holders of the company. Each preferred B share can be converted into 100 common shares for a total of 40 million. In February and March close to 13 million shares were issued upon conversion of preferred shares and the effects of the dilution can be seen in the chart.
Investors now also have access to the financial results of the private company bitcoinshop.us for the last quarter of 2013 and the numbers are far from encouraging with less than $30 thousand in sales.
have branched out a bit and now accept two additional cryptocurrencies – Litecoin and Dogecoin but they all share the same problems as bitcoin. Hacker attacks stole hundreds of millions worth of bitcoins and at the start of the month the IRS said the Bitcoin will be treated as property and taxed at the lower capital gains rate instead of an income rate.
The next quarterly report should be filed within the next two weeks and it will determine the fate of the stock. If it shows a substantial increase in sales or a dramatic increase in users registered to their services BTCS
might be able to sustain higher valuations for its shares. But for now the market cap of $44 million is grossly disconnected from the reality of the company.