It’s the End of the Road for Medient Studios Inc (OTCMKTS:MDNT)
Twelve months ago, investing in Medient Studios Inc (OTCMKTS:MDNT) didn’t seem like a really bad idea. Of course, it had its risks, but the company had some money in the bank, they had quite a lot of film assets and they generated $1.9 million in sales during the first half of 2013.
The revenue stream wasn’t all that consistent, but the management team (led by Manu Kumaran) were insistent that with the Studioplex project underway, the future will be quite a bit different. Even the Effingham County Industrial Development Authority promised that they’ll help MDNT finish the state-of-the-art facility and, as a result, the price soared above the $2 mark. The share structure wasn’t too bad and people thought that the ticker has what it takes to sustain the pressure at these levels.
It’s amazing how quickly things change in Pennyland.
Slowly but surely, a problem that is quite common among OTC companies started to rear its ugly head. Signs of dilution appeared in the report for the second quarter of 2013 and the price began sliding down. Then, the pumpers came along and did nothing but accelerate the fall.
Suddenly, the 52-week high of $2.33 per share seemed too far away, but unfortunately, the slide was still in its initial stages. With the printing press firing on all cylinders, MDNT slipped below $0.10 per share in November and continued sinking at a rapid rate. By February 2014 it was already under the $0.01 mark and over the following four months, it incinerated another 86% of its market cap.
Undoubtedly, MDNT was one of the worst performing stocks on the OTC markets, but was this really all that surprising?
Considering the catastrophic dilution and the recent fiasco around MDNT‘s CEO, we can safely say that there was little to entice investors into jumping in. As we mentioned in our previous article, Manu Kumaran was ousted from the company and his seat was taken by a person called Jake Shapiro (whose CV raised some questions around MDNT‘s future).
Mr. Kumaran said that he will sue the company and the people who removed him from the helm and on June 23, he filed a complaint against MDNT, Charles Koppelman (the new Chairman of the Board), Mr. Shapiro, as well as a few other individuals.
On the very same day, the new management team announced that somebody has been hacking into their website without their permission. They said that they, themselves, plan to take some legal actions against the perpetrators. In the meantime, the stock was plummeting and people were getting more and more enraged by the whole thing.
A few seconds before yesterday’s opening bell, the SEC decided to put an end to the farce that MDNT has become over the last few weeks. A suspension order was issued as a result of which, investors won’t be able to trade the stock over the next fourteen days. Trading will be renewed on July 10, but it will most likely be carried out on the Gray Market and MDNT will probably experience another heavy drop once it reopens.
The truly sad thing about the whole fiasco is the fact that the shareholders are the ones who will have to suffer the consequences. Some of them have already lost a colossal part of their investments and right now, the chances of recovery are looking slim (putting it mildly).
It is indeed sad to see so much money go down the drain, but at least yesterday’s suspension should serve as a really good example of how risky penny stocks can be. Hopefully, most of our readers managed to get out relatively unscathed.