EnerTeck Corp (OTCMKTS:ETCK) Gets a Surprise Crash
Following a couple of sessions without a single share traded last week, on Friday EnerTeck Corp (OTCMKTS:ETCK) got nearly a third of its market cap sliced off in one fell swoop. Volume ballooned massively to 502 thousand shares – a record for the ticker – and ETCK crashed 32% down to stop at $0.37 per share.
ETCK has been traded thinly in 2015 so far and zero volume days are not uncommon. Considering there have been no new filings or press releases coming from ETCK last week, the sudden dump that pushed the price to its deep red close may be a bit of a shocker for traders.
However, the company’s most recent filing – an 8-K dated July 2 – makes for interesting reading. The filing details an agreement between ETCK and Mr. Thomas Donino – company director, his wife and a “family limited partnership” entity with members who are relatives of the Donino family. Between early 2012 and late 2014 Mr. Donino and the family limited partnership made a number of cash advances to the public company and now it seems they decided to have those repaid with stock.
The catch is, they calculations to turn those advances into shares were made using the same terms offered to investors at the time the advances were made – that is to say, at significantly lower share prices. The sums advanced to the public entity were converted into units consisting of common ETCK stock and warrants to purchase more shares, as well as converted directly into common stock.
While the warrant exercise prices are significantly higher, the units were priced at $0.60 and consisted of two shares of common stock in addition to the warrant, setting the per-share price at $0.30. The advanced converted directly into shares had a conversion price of $0.35 and $0.20 per share.
In light of the fact that ETCK was trading for $0.50 on the open market on the day the agreement was signed, it’s actually a little surprising that the price did not slip much sooner. After Friday’s slump, ETCK is a lot closer to the prices at which the Donino family received the shares and things may simmer down from this point on.