Borislav Tonev

Hipcricket Inc (OTCBB:HIPP) Bounces off a 52-Week Low

by Borislav Tonev May 27, 2014
01HIPP.pngHipcricket Inc (OTCBB:HIPP, HIPP message board) was incorporated a while ago, but it's been traded under its current name and ticker symbol for a little over nine months. When the new identity was set up, the stock was hovering around the $0.60 per share mark. Right now, after a 31% bounce on Friday, it's sitting at a little over $0.23.

That's somewhat strange since HIPP is one of the more solid enterprises on the OTC Markets. According to the latest 10-K, they have 120 employees, an interesting business plan, and they seem to be hard at work putting the pieces together. Unlike the majority of penny stock enterprises, HIPP also have some capital to work with. Here's what the balance sheet looked like at the end of February:

  • cash: $3 million
  • current assets: $10.4 million
  • current liabilities: $10 million
  • yearly revenues: $26.7 million
  • yearly net loss: $22.2 million

You can see that the figures don't sound too terrible, but unfortunately, there are some problems. If you compare them to the results registered at the end of the previous fiscal year, you'll see that the revenues are growing, but the jump amounts to less than 2% and apparently, this isn't good enough for the investors. What's more, the net loss has indeed shrunk by a whopping 54%, but unfortunately, the gross margin has also experienced a decline.

On the whole, there are some positive things, but there are also a few problems that need addressing. Still, are they enough to drag the stock from over $0.60 to as little as $0.16?

Unfortunately, nobody can be sure about this. Over the last few months, HIPP experienced some devastating crashes and they all remained largely unexplained. The people around the message boards are still speculating on the reasons for the horrific stock performance, and we can see that most of them, particularly the ones who perceive HIPP as a long-term investment, don't seem too happy with the accomplishments of the management team.

Many investors reckon that the current officers and directors have missed some great opportunities to turn the company into a serious player in the mobile advertisement business and they also think that if some new people take the helm, HIPP might be able to put on a more decent performance. Is this really the case?

Once again, it's all speculation which means that a definitive answer can not be given. Even if the management team goes through an overhaul, however, there are some risks that are well worth considering.

6HIPP_logo.pngHIPP is still involved in a couple of lawsuits that could adversely affect the company and its stock. The shareholders are also not immune from the effects of further share issuance. You can read in the 10-K that institutional investors acquired quite a lot of stock back in 2013 and the latest filings suggest that they might have the right to sell their holdings on the open market really soon.

And even if you disregard those risk factors, you should still bear in mind HIPP's volatility. The ticker has shown us that it's prone to making some wild and unexpected swings and if you get caught off-guard, you could be looking at some heavy losses. Considering all the risks and avoiding over-investments is, as always, absolutely essential.

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