CMG Holdings Group Inc (OTCMKTS:CMGO) Bounces Out of Triple-Zero Land

Mr. Glenn Laken, CMG Holdings Group Inc (OTCMKTS:CMGO)’s CEO, made an announcement yesterday. He said that he is going to offer each and every single one of the shareholders to exchange their common shares for Series A preferred ones. The ratio will be 50 common shares for 1 Series A share and the preferred stock, once created, will give its holders first priority in an event of litigation settlement.

On the one hand, Mr. Laken said, this should help CMGO move on with its acquisition plans. On the other, it should also allow easier access to fresh capital which is needed to support the ongoing lawsuit against some of the company’s former employees. The market reacted to the news.

Nearly 157 million shares changed hands in a matter of six and a half hours which pushed the dollar volume up to $176 thousand. The ticker elbowed its way out of the triple-zero levels and it stopped at $0.0012 (50% above the value at the end of Wednesday’s session). Investors trust Mr. Laken and his strategy to push CMGO in the right direction. Or do they?

Well, there’s a somewhat heated discussion around the message boards at the moment. Some people reckon that CMGO is about to show its full potential and that Mr. Laken is a terrific CEO. Others, however, say that jumping in on a company simply because of an ongoing litigation (the outcome of which can not be predicted with any sort of reasonable certainty) is a risky move. The skeptics aren’t particularly fond of Mr. Laken’s presence as well.

Of course, ultimately, you will be the one to decide which camp you will side with. All we can do is list a couple of things that you should probably take into consideration.

Apart from the aforementioned lawsuit, there really isn’t a whole lot to make CMGO look like an attractive investment. This means that at the moment, the hype around the legal proceedings is the only thing supporting the stock. And it’s not doing a very good job.

The ticker first popped up on July 2 when, in a rather explosive move, it reached over $0.002 per share. Sadly, it failed to remain there for long and just ten days later, it bottomed out at a new 52-week low of $0.0007 per share.

This has in turn brought another problem which we’ll talk about in a minute, but first, let’s take a look at the latest 10-Q and see just how bad CMGO‘s financial situation was at the end of the first quarter:

  • cash: $7,023
  • current assets: $15,423
  • current liabilities: $1,516,463
  • revenue: $46,690 (a 97% year over year drop)
  • net loss: $217,519

You can now see what we meant when we said that there’s nothing else that could entice you into jumping in apart from the lawsuit. A closer look at the statement makes things look even more troubling. There were quite a lot of notes outstanding at the end of Q1 and some of them can be converted into common stock at a 30% discount to the lowest trading price registered by CMGO during the 20 sessions prior to conversion. In other words, thanks to the 52-week low logged a couple of days ago, some lucky note holders can now receive CMGO shares at a price of less than $0.0005 apiece.

Last but not least, some people are a bit apprehensive about Mr. Laken and the companies he’s heading because they’ve been burned in the past. Mr. Laken was a majority shareholder in a company called Inc (traded under the FWEB symbol). He apparently did some bad things to the company and its stock and quite a lot of people lost quite a lot of money because of this. The scandal (which had some legal implications for Mr. Laken) was covered by more than a few big media outlets and we also touched upon it in our previous articles on CMGO. Make sure you get to know all the facts before deciding on your next move.

You may also like...