Zoned Properties Inc (OTCMKTS:ZDPY) Bounces Slightly

ZDPY.pngZoned Properties Inc (OTCMKTS:ZDPY) reached a mind-bending 52-week high of more than $28 per share on March 5. Everyone was extremely excited about the stock performance and there was no shortage of people who believed that the company really is onto something. Unfortunately, the ticker’s behavior over the last couple of months suggests otherwise.

By the beginning of April, ZDPY had already dropped down to around $10 per share and the slide didn’t stop there. Yesterday, it managed to bounce back by a respectable 25%, but it still finished the session at just $1.65.

A truly appalling performance, no doubt, but even at these levels, the market cap (according to the company profile on the OTC Markets) hovers around the $40 million mark. That seems like a bit of a stretch for an enterprise that has the following figures in its latest financial statement:

  • total assets: $12 thousand
  • total liabilities: $254 thousand
  • 2013 revenue: $0
  • 2013 net loss: $387 thousand

That said, the levels ZDPY occupied a couple of months ago (the same goes for the current price) were not dictated by the figures in the balance sheet. They are, in fact, the result of the changes that the company went through at the end of 2013.

The name and ticker symbol were changed back in October and on January 9, the new management team came up with a press release which informed us about a new business plan. Apparently, they have decided to ditch the mineral exploration industry and are now focused on acquiring and developing commercial properties which can be used as medical marijuana dispensaries or cultivation facilities.

Sure enough, the cannabis craze, along with a flurry of optimistic press releases pushed the ticker sky-high. The horrific drop that we’ve seen over the last two months, however, shows pretty definitively that hype alone can never be enough to support a stock in the long run.

In the interest of fairness, we should note that with the new business plan in place, ZDPY now looks like a completely different company. The press releases inform us that over the last four months, they have managed to complete several acquisitions. Some money was also raised through a private placement which should result in a much more solid financial position. At the moment, investors don’t seem particularly happy about the 1 for 120 reverse split that was announced on Friday, but a potential success with the new business plan will mean a brighter future for their holdings. Whether ZDPY have what it takes to make it is a completely different matter.

And while traders wait for the future reports and proof of the company’s success, they might want to consider one or two other things. A company information and disclosure statement filed on April 24 tells us that during the first quarter of 2014, ZDPY converted around $330 thousand worth of notes into nearly 3 million shares. The same document says that there is more than $70 thousand worth of debt that is due on demand and can be turned into common stock at a rate of just $0.05 per share. 5PGFY.pngTwo more notes were issued in January which carry a 50% discount in their conversion features.

We probably don’t need to tell you that if a huge amount of cheap stock hit the open market, the effects on the performance could be pretty devastating. How devastating? The people who got a bit carried away with the hype around Pingify International Inc (OTCBB:PGFY) can give you the answer.

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