Infinity Energy Resources, Inc. (OTCMKTS:IFNY) Crashes as Critical Stories Surface
Infinity Energy Resources, Inc. (OTCMKTS:IFNY) was retreating from a peak above $3.50, slowly deflating- when Thursday came with a sudden cut of more than 29%. IFNY slid from $2.90 to $2.05 in a single day, on record selling volumes above $720,000. The daily fallout is also unprecedented, although IFNY has managed steep climbs and retreats in the past. So far, the company has impressed with press releases, and has not appeared in a paid email promotion.
IFNY is one of those penny stocks which present an image of respectability, based on promises of energy production. Thus, IFNY has its own personal story, but also rides the general hype for the industry, where even one tentative oil deal may help boost the stock price. In the case of IFNY, the promised oil bonanza is in the Nicaraguan offshore zone- an extremely expensive challenge to achieve production.
Needless to say, penny stock oil companies rarely show perfect production levels, and IFNY is no exception. Still, this stock held up, partially due to its relatively stable financials:
- cash: $143 thousand
- current assets: $154 thousand
- current liabilities: $5.9 million
- no revenue since inception
- quarterly net loss: $781 thousand
IFNY is certainly not yet on top of the game, and with just 21 million shares outstanding a dilution with new issues is a viable option. Not to mention that IFNY has issued enough warrants at low prices, possibly fueling selling when the price is right. And simply stated, IFNY does not have enough money to even start thinking about offshore drilling- in fact, reports often contain a going concert warning, putting IFNY on the verge of either aggressive financing attempts, or insolvency.
In the past week, we had a similar case, an oil and gas prospecting company that had little real assets to show, yet managed a robust climb in price. First Titan Corp. (OTCBB:FTTN) is even listed to a higher-tier exchange, but this did not prevent the stock’s fallout, as on Thursday the ticker even disappeared from the most actively traded penny stocks.
An older sensation, OriginOil, Inc. (OTCMKTS:OOIL) quickly sank to less than half its pre-promotion levels, showing no signs of running up again despite the longer-term enticing promises.
Perhaps the real reason for the fallout in IFNY was a Seeking Alpha article that outlined all the faults in the company, warning naïve investors who were still on board, believing all the hype.
The biggest fallout has already happened, but even at $2 IFNY has little to support the relatively respectable price, so it is best to stay away unless you can afford a further exodus of investors and a further downward shift in the price. Even if IFNY tries to move in with another press release, much damage was done to the company and the next months will show if a recovery is possible or if IFNY would move to a lower range.