Hemp Inc (OTCMKTS:HEMP) Goes Silent, Stock Continues to Slide
At the end of January and the start of February, last year, the stock of Hemp Inc (OTCMKTS:HEMP) surged over 30 cents per share. After wiping another 8% of its value last Friday the stock is now sitting at $0.0115. The losses have been tremendous but it should be noted that according to the SEC such highs were achieved through an illegal manipulation of the stock by a group of four stock promoters.
So instead let’s see how HEMP‘s stock has been performing in just the past couple of months. Back in February 2015 the ticker briefly reached a high of 5 cents per share. Since then the stock has slashed 77% of its price. The chart performance has been a total disaster but should investors expect the stock to recover?
Well, the red flags around the company seem to only be getting more and more numerous. HEMP’s financials have been a cause for worries for quite a while but the results for the first quarter of the year were simply atrocious. The restated quarterly report that was filed on June 16 actually showed that the picture was even grimmer. Compared to the initially revealed numbers HEMP’s inventory was now reduced in half, the $1.15 million that were owed to the CEO Mr. Bruce Perlowin turned out to be over $2 million while at the same time after the restatement the gross loss increased by $2000 to $23,104 (this means that in order to generate the quarterly revenues of $6223 HEMP incurred costs of goods sold of $29,327).
As we said HEMP owe quite a lot of money to their CEO and the company has been routinely reducing that amount by issuing Mr. Perlowin millions of preferred K shares. In turn Mr. Perlowin has been continuously converting these shares into common shares at a 1-for-10 ratio. Not surprisingly the outstanding shares have been growing out of control and the dilution has been simply crushing. With more than 2.7 billion shares outstanding we have been warning you that an increase of the 3 billion authorized shares was more than likely. And we were exactly right – HEMP have increased their authorized shares to 5.5 billion.
June 16, the date when the restated quarterly was filed, is also the date of the last PR published by the company. Two weeks of silence wouldn’t be that alarming if we were talking about some other pennystock but for HEMP it is quite unusual. The company has been issuing a new PR every couple of days for quite some time and the sudden lack of any press releases has certainly influenced investors’ sentiment.
The lack of news becomes even stranger when you consider the fact that at the end of May an engineer from Temafa finally arrived at HEMP’s facility in North Carolina which meant that after several delays the reassembly of the Temafa decortication line could finally begin.
The risks around HEMP remain significant. Not to mention that even after suffering such massive losses the company still commands a market cap of more than $31 million, valuation that could be viewed as overly-inflated. If you are determined to play the stock be sure to do extensive due diligence before putting any money on the line.
