Yesterday, towards the end of the trading session we received another wave of promotional emails about Great China Mania Holdings Inc (OTCBB:GMEC
, GMEC message board
). The newsletters who sent them are PennyAuthority
, Elite Penny Stock
, Penny Lane
and they're all owned by an entity called Advanced Marketing Services. The compensation disclosed in the fine print is $2,500, and when we read through the emails, we got the feeling that they are leaving GMEC alone for now. The rest of the newsletters are also quiet at the moment, so we decided that a recap of what happened to GMEC over the last month or so, is appropriate.
In terms of the pumping activity, the campaign started on April 15 when the first emails from the aforementioned newsletters hit the investors' inboxes and from the very start it looked like the whole thing will turn into a spectacular failure. The ticker started going South at a rapid speed and by the end of April it was pretty close to its 52-week low. A couple of days later, it reached it causing quite a lot of grumpy faces among investors.
And just as everyone thought that the stock is done for, GMEC managed to recover. And what a recovery? It began on May 3 and after a relatively slow start it absolutely skyrocketed. By May 15 the price had increased by a whopping 583%. This was followed by two days in the red, but yesterday, it gained some ground back up and right now, about an hour into the trading session, it's going strong. All in all, quite the epic run, we would say.
GMEC also managed to publish their quarterly report for the period before March 31 yesterday and when we saw a new filing, we thought that it was the reason for the 20% gains from the latest trading session. That's not strictly the case, though. Here are the figures:
- cash: $298 thousand
- current assets: $804 thousand
- current liabilities: $1.4 million
- revenue: $371 thousand
- net loss: $306 thousand
More worryingly, when you take just a quick look through the statement and compare it with the one from last year, you will see that the current financials look a lot worse. GMEC say, however, that there is a silver lining.
They seem to rely on the fact that they have stopped some of their unprofitable subsidiaries, and they have high hopes that this will make the years to come a lot brighter. While that might turn out to be correct, we can't really be sure if it will happen and we won't be until we see the next financial statements. Unfortunately, we'll need to wait for quite a bit longer until we receive them.
In the meantime, we would like to discuss some things that turn GMEC into a not-so-attractive investment option.
Share issuance is the first one. They said in a press release back on April 19 that they are paying off some of the debt in cash so that they can avoid new shares being issued which would dilute the shareholders' investment. If you read through our article from April 22 you will see that we have included it in our report and, of course we said that taking care of your shareholders is an admirable thing to do. They don't seem to issue press releases when they convert $75 thousand worth of debt into a whopping 5.1 million common shares, though. According to the latest 10-Q, that's exactly what they did.
The second thing that we would like to turn our attention to is GMEC's promotional history. The first email that we managed to intercept about them is dated October 14, 2012 and since then the number has grown to more that 140. Not enough space in our inbox, however is the least of our worries. When you compare the stock price back then with the one right now, you will see that even after the impressive run from the last few weeks, GMEC's shares are now around 53% cheaper.
This just goes to show that when a company relies on nothing more than artificial hype created by bombastic press releases and paid promoters, things usually don't end well. It's up to you to choose wisely and take good care before jumping in on excitement alone.