MusclePharm Corp. (OTCMKTS:MSLP) Stumbles Under Legal pressure

Investors ran for cover at the announcement that MusclePharm Corp. (OTCMKTS:MSLP) is going to come under investigation by Hynes Keller & Hernandez, LLC.

To be fair, the market’s reaction might have been a bit severe. After all, all that’s happened is an announcement that the MSLP‘s affairs are being looked into. The fact that a huge legal company such as HKH is doing the research is somewhat disconcerting, but does it really warrant a 26.70% drop after more than 100 thousand shares change hands in a single session?

That just might be the case. You see, a bit of due diligence reveals that MSLP is not doing too well financially. Its latest 10-Q for the period ended March 31, 2015 showed some pretty disconcerting figures:

  • Cash – $4.7 million
  • Total current assets – $45.7 million
  • Total current liabilities – $44.1 million
  • Quarterly revenue – $41.3 million
  • Quarterly net loss – $7.4 million

The company technically has resources at its disposal, but if its results are any indication, it still hasn’t found a way to utilize those resources to make a profit.

To make a long story short – MSLP‘s situation is far from stable, and a SEC investigation might just be the last straw that breaks the camel’s back.

The threat of it alone has proved enough to cost the company more than a fourth of its market value in a single session. Now imagine what could happen if MSLP is actually proved to have “disclosure and internal control deficiencies”.

Needless to say, the results could be catastrophic for anyone involved. This is why current shareholders and investors who wish to trade MSLP stock alike should be doubly diligent and careful, and keep an ear close to the ground, listening for the first sign of trouble.

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