Whenever a particular stock rises in value on the NYSE, we have got used to attributing this to a supposed corporate milestone. The other way round is more or less the same. What about penny stock, though? Well, whenever such a stock skyrockets or takes a nosedive, we all know what that means, i.e there is a paid promotion going on. The case with W Technologies, Inc. (PINK:WTCG
, WTCG message board
) makes no exception.
Yesterday, WTCG crashed. Closing at $0.013 per share, WTCG lost a whopping 48% of its market value on a record-breaking volume of 14.6 million. This outcome has certainly taken some novice traders by surprise. However, if you have kept track of our pennyland coverage, you will know for sure that the main culprits here are the army of promoters who got an aggregate of $168 thousand dollars from various third parties to tout the stock of W Technologies. For those of you who still do not associate paid advertising with grand market failures, here are a few reasons why WTCG was bound to foment such a catastrophe:
- WTCG's miserable performance in previous promotions
- WTCG's controversial claims regarding its business operations
- WTCG's terrible financial state
To begin with, this is by far not the first time WTCG has fallen under the promotional spotlight. In fact, the company was first pumped on Aug. 2, 2011. As a result, WTCG decreased by a staggering 85% in just a couple of days.
Eight months later, i.e on Apr. 12, 2012, the company's stock got another promo injection. This time, WTCG secured a first-day gain of 70%. However, this is where the good news ended. Two weeks later, WTCG had already gone down 75%
. Three months later, WTCG hit a 36-month low of $0.0026 per share, down 94%
from its promo-inflated value. Needless to say, the company never managed to recover following these two devastating promotional blows. What is more, the newest promotional emails set a target price of $0.08-$0.09 per share, i.e a level WTCG has not been able to achieve for the last 16 months or so.
As per WTCG's official website, the company is lead by experienced technology professionals aimed at integrating social media and mobile marketing solutions to offer a wide range of web-related services. According to WTCG's latest annual report, however, the company has no other employees than CEO Ronald Costa, who also serves as President, CFO and director. So where are the highly experienced technicians? If this were not enough, that same report says the company "is attempting to commence operations and generate revenues" - a statement which does not exactly resonate with the company's claim to have had such past customers and development partners as AT&T, BP, Exxon, IBM, Shell, NASA, Microsoft, etc. (as stated on WTCG's official website,too).
Last but not least, WTCG's fundamental position could hardly attract any investors because of its:
- extensive dilutive practices - while the company's O/S as of Jul. 31, 2011 amounted to 43 million, it shot up to 336 million just within the latest fiscal year ended Jul. 31, 2012, thus allowing for a 700% dilution on current shareholders.
- total inability to pay off its debts - what had originally been construed as a short-term loan of $655 thousand in 2006 has now been extended for a whole 6 years. As of Jul. 31, 2012, the company's obligation under that same note exceeds $840 thousand. How much more time will Mr. Costa need to pay it off in full?
- doubtful evaluation methods - WTCG's assets page contains an entry called investments evaluated at $2.3 million. The latter is comprised of a 20% stake in a joint venture. Is it really the the stake's intrinsic value? On Apr. 30, the company was forced to record impairment of intangible assets worth $1.4 million after reaching to the conclusion that the actual utilization of this assests was "in doubt". In this respect, what is the guarantee that the current JV is beyond doubt?
To wrap it up, let us take a quick glance at the market performance of other penny stocks that had previously been pumped by the same promoters and by Penny Stocks VIP in particular:
- DoMark International, Inc. (PINK:DOMK) -> pumped on Nov. 15 for $45 thousand, DOMK did go up 6% on the first post-promo day, only to slump by 53% in just 3 weeks.
- Ludwig Enterprises, Inc. (PINK:LUDG) -> promoted on Nov. 12 against compensation of $45 thousand, the stock enjoyed a momentary surge before the parties behind the pump butchered it. LUDG has since shrunk by almost 70%.
- Liberty Gold Corp. (OTC:LBGO) -> touted on Aug. 20 through an eighty-five-thousand-dollar campaign, LBGO shares scored a minuscule first-day gain of 8% followed by a continual free-fall which has so far resulted in an aggregate 75% depreciation.
Yesterday, WTCG's total O/S had a market worth of $10 million. Today, its market cap has halved. Nevertheless, if you were to buy the whole company, what you would get in return would be nowhere near $5 million for the time being.