Ever since Day One, Alkaline Water Company Inc (OTCBB:WTER
, WTER message board
) looked like a prime candidate for a promotion. The name was changed recently, a new business plan was drawn, the stock was split, the number of authorized shares was increased and some optimistic press releases were brought up for everyone to get excited about.
In addition to this, looking at the older filings, we find some things of interest. When the venture went public, it was called Global Lines Inc. and if you check out the S-1 filing, you'll see that the law firm employed to help them sort out the paperwork is the infamous Carrillo Huettel, LLP. In case you don't know who Luis Carrillo and Wade Huettel are, you might want to have a look at this article where you'll see that they were sued by the SEC over claims that they were performing a pump and dump scheme. You can see that the odds of a promotion were pretty good. Sure enough, the campaign is now a fact.
At only ten emails in about a month, the mailing activity is pretty poor, but it is substituted by constant touting through landing pages, search ads and paid message board posters who ruin the chance of a normal discussion. As we wrote previously, the budget is a not-inconsiderable $3 million which means that the possibilities of a hard mailer campaign in the near future are very real.
Yet, despite all this, WTER is quite different from most of the penny stocks put under the pressure of a multi-million dollar pump. Sure, they do seem to be quite keen on issuing press release after press release, but they also have a financial statement that shows some revenues and about $400 thousand in working capital which is not too shabby for a penny stock that started trading a couple of months ago. Still, we reckon that putting WTER next to giants like The Coca-Cola Company (NYSE:KO) and PepsiCo, Inc. (NYSE:PEP) is a bit of a stretch.
Nevertheless, the ticker is performing relatively well under the pressure. The first emails came flying into our inbox at the beginning of August which probably coincided with the launch of the landing page and since then, there have been very few red sessions with daily losses rarely exceeding 10%. Overall, the price went up from around $0.40 all the way to $0.60 in about forty days and yesterday, WTER added 22% which means that the ticker is currently traded at $0.71 per share. This sort of performance is the stuff of dreams, but before you go jumping in, there are some things to consider.
The first is very obvious - there is a pump running and when you go into the details, it seems to be very well planned. If you take the landing page, for example, you'll see that the domain for it was registered on July 2 (about a month before the start of the actual touting). That wouldn't have been so peculiar if it wasn't for the fact that the address for the company's official website was reserved ten days later, on July 12.
You should also bear in mind that the budget is huge. A third party (Investech Equity, according to the landing page disclaimer) has splashed out $3 million on the advertisement. That's quite a lot of money and we're sure that the people who stand behind the whole thing would like to get some of it back. How can this happen?
Well, the disclaimer says that entities affiliated to Investech Equity are holding "a large amount of shares in WTER" and if they are to release their holdings on the open market, the effects on the price could be quite catastrophic. Who might these entities be? Well, when the merger between the old public company and the then-private Alkaline Water was completed, a vast amount of stock saw the light of day. It is valued at $0.40 per share which means that just a month after the start of the campaign, the holders of the newly issued stock are already presented with an opportunity for a healthy profit.
Make sure you have this in mind, unless you want to get caught up in a slide which, all things considered, seems rather inevitable. People who lost money on other multi-million dollar pumps like the ones for Petrosonic Energy Inc (OTCMKTS:PSON) and Arch Therapeutics Inc (OTCBB:ARTH) know exactly what we're talking about and we reckon that if you want to avoid a similar faith, you should definitely use extra caution when dealing with WTER.