Converge Global, Inc. (OTCMKTS:CVRG) Crashes Despite a Paid Promotion

5CVRG.pngAbout fifteen minutes before yesterday’s opening bell, Converge Global, Inc. (OTCMKTS:CVRG) announced that they have entered into an agreement for the acquisition of a producing gold mine in Russia. The management team told us that they are very excited about the deal and informed us that it will be closed through the issuance of restricted stock as well as through cash payments.

At the same time, the pumpers were busy spreading optimism around. A total of twenty emails worth more than $30 thousand were received from a range of promotional outfits. 007 Stock Chat and Stock Hideout were leading the pack as the most influential newsletters.

It looked like CVRG is ready for a climb up the charts. Yet, for some reason, it failed to impress.

In fact, the stock managed to lose nearly a third of its value while investors traded more than $436 thousand worth of shares. CVRG closed the session below the $0.01 mark for the first time since April. Naturally enough, a question arises: “Why?“.

The reason for yesterday’s drop could be partly attributable to the fact that trusting CVRG with your money is not that easy. The stock has hardly been traded over the last couple of months and there can be no guarantees that anyone will be interested once the promotional dust settles.

At the same time, despite the promising-looking press releases, the company’s financial situation is not that great. Here’s a summary of the figures as found in the latest report:

  • cash: $276
  • total assets: $4.3 million
  • current liabilities: $643 thousand
  • NO revenue
  • net loss: $20 thousand

Indeed, there’s a lot of assets, but most of them consist of investments in one of CVRG‘s subsidiaries – Sintek Inc. Speaking of which, we read in the disclosure statement that the acquisition of Sintek was dependent on the payment of $300 thousand in three equal installments. The report somehow fails to mention if these transactions were completed.

There are some other discrepancies as well. According to the financial statements, CVRG signed a Letter of Intent with Grant Ltd on April 28. For reasons that are not very clear, the LOI wasn’t announced through a press release until three weeks ago.

2CVRG_logo.pngAs you can see, there’s no shortage of things that could have contributed to yesterday’s drop, but you don’t really need to look that deep to see that a crash was all but inevitable.

All you need to do is, in fact, scroll down to Page 2 of the latest Disclosure Statement. In there you’ll see that in July 2013 (just days after raising the authorized capital), CVRG converted $509,602 worth of debt into 509,601,800 shares of common stock. This brings the conversionprice down to just $0.001 per share and it presents the former note holders with a massive profit opportunity. As you can see, a large amount of discounted stock and a promotional campaign rarely make for a good combination.

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