STW Resources Holding Corp (OTCMKTS:STWS) Geysers Upward

STW Resources Holding Corp (OTCMKTS:STWS) have been pretty busy over the last few days. First, on August 11, they issued a press release and announced that they’re expanding their joint venture with their Swiss partners from Sunstone Water Group.

A couple of days later, they announced that their pipeline division has reached profitability during Q2. They said that the contracts they are signing are bringing a lot of revenues and favorable profit margins, and they informed us that they’ll soon begin to offer new environmental services which should also be launched at minimal expenditures.

On Tuesday, STWS issued their third press release in a matter of just seven days and said that another brackish water lease in Ft. Stockton, Texas has been acquired. The management team expects that this new lease, along with the ones that are already in the company’s portfolio will produce between 1 million and 2.5 million gallons of water per day.

The only thing STWS failed to do was publish their Q2 report on time. They were probably distracted by the stock’s wild and terrifying performance.

Investors didn’t really react to the torrent of good news at first. In fact, trading was extremely slow between August 11 and August 18, and after a small peak during the second day, the ticker tumbled, stopping at a brand new 52-week low of $0.14 on Tuesday. Something interesting happened yesterday. Suddenly, investors flocked to the stock and after pouring more than $110 thousand into it, they pushed it to a price of $0.34 (a gain of 143%).

Explaining the massive spike in volume and price is not that easy. It occurred twenty-four hours after the latest press release and it wasn’t caused by any sort of traceable promotional activity. It did happen, however, which means that some people’s money are now on the line. Time to see if they can get a return on their investments.

The historical performance is not too encouraging. The stock has never really been among investors’ favorites, and in November of last year, the management team effected a 1 for 6 reverse split in an attempt to make it a bit more appealing. That wasn’t enough. The volumes remained pretty dismal for the most part and the ticker lost exactly 90% of its value in a matter of less than five months.

Once you open the latest 10-Q, you’ll see that STWS will need a lot more than a reverse split if it is to be taken seriously by investors. It’s going to need a better looking balance sheet.

Here’s what the financials looked like at the end of Q1:

  • NO cash
  • current assets: $4 million
  • current liabilities: $24 million
  • quarterly revenues: $2.7 million
  • quarterly net loss: $2.8 million

Starting off with the less obvious, the revenues for the first three months of the year have experienced a 25% year over year drop and on a sequential basis, they are a whopping 41% down. With a $20 million working capital deficit, the company can never really be considered a viable long-term investment.

Of course, the management team tells us that things are looking better at the moment. But how much better exactly? The Q2 report (which should be out before the end of the day) and the ones for the coming quarters should give us an idea.

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