NuGene International Inc (OTCBB:NUGN) Falls Down
During yesterday’s trading the stock of NuGene Internationall Inc (OTCBB:NUGN) suffered a hefty correction wiping 14% of its value and dropping down to $3.32 per share. Although the crash was significant it is nowhere near the devastating June 11 session when the stock lost nearly 40% in a single day.
NUGN is definitely among the more stable pennystock ventures. The company not only has real products but it has been generating impressive revenues. The fact that Ms. Kathy Ireland is involved with the company also speaks volumes about NUGN’s credibility. Despite all of the positive aspects around NuGene it must be noted that their current market cap of more than $131 million seems a bit unrealistic. The latest financial report covers the first three months of the year and according to it at the end of March NUGN had:
• $619 thousand cash
• $1.3 million current assets
• $305 thousand current liabilities
• $481 thousand revenues
• $240 thousand net loss
As we said the balance sheet is definitely not that bad especially when compared to the majority of the other pennystocks but it is simply not enough to justify NUGN’s market valuation. If that is the case then how has NUGN’s stock been forming such impressive runs up the chart spanning numerous consecutive session of gains? The answer is quite simple – a paid pump.
The stock of the company has been targeted by a hard mailer promotion. At first the pump had a disclosed budget of around $2.3 million but more recent copies of the glossy brochures state that $4.4 million have been set aside for the campaign. Thanks to the artificial hype NUGN has been able to reach some truly inflated price ranges and the massive amount of money, even if the exact number is somewhat exaggerated, could allow for the promotion to last quite a while.
Although NuGene have a small amount of outstanding shares – 39.5 million as of May 15, a sizable portion of them are free-trading shares that have a split-adjusted price of $0.0033. Last year some investors bought 148,200 shares for $37,050. Thanks to the 15-for-1 forward split executed at the end of January, this year, those investors now owned more than 11.1 million shares and could reap millions upon millions of profits if they dump them on the market during the promotion.
Despite lacking some of the more glaring problems associated with pennystocks the paid pump turns NUGN into an extremely risky stock. Use caution and set appropriate time horizons for you trades.
