Cindigm.jpgDespite the tiny price increase and the volume spike from yesterday, Cinedigm Digital Cinema Corp. (NASDAQ:CIDM, CIDM message board) stock retains its downtrend from the last two months. The stock has high dilution risks and without any significant technology improvements of the company over the past year, investors do not consider it a good investment currently.

With its 0.78% increase in the stock price and the much more considerable volume spike of 219% in the middle of the trading session , Cinedigm got some investor attention yesterday. The market finally coincided on a close at $1.30, but as that price again approaches the lower trading band, which was broken on Tuesday for the second time this month, no strong signals for trend reversal can be observed.

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That is also not suggested by Cinedigm's fundamentals.

Last Wednesday's announcement about the company's partnership with FIFA to bring the 2010 FIFA World Cup Final in LIVE 3D to a select group of certified theaters in the United States and Canada did not really launch a furor on the market for their stock. Probably because it followed the announcement that certain shareholders of the company may resale up to 17.9 million shares of the company's common stock, and another 16 million shares can be issued upon exercise of warrants. In total, investor reaction was negative and they seem to be willing to postpone the dilution, since the exercise price for the warrants is $1.37.

But still, their exercise will at least bring in some cash for Cinedigm. And the cash is needed, because even if the business has stably growing sales, it grows too slowly and its organization in five different business segments still appears to be too complicated in order to be efficient. Another question is for what the cash will be used, as from the $75,000 proceeds from the sale of the above mentioned warrants sold in a private placement last year, after repaying existent debt, only $11,300 were left to be invested directly into the operations.

Moreover, the company has been making only losses from the beginning, still has a lot of debt and the largest part of the revenues comes from fees, paid by movie theatres for using the company's digital cinema equipment. Management's corporate strategy to transform movie theatres into entertainment centers by providing a hardware and software platform can hardly be seen as innovative, considering that the industry is already highly saturated and one needs a breakthrough technology in order to make profits.