Borislav Tonev

Red Giant Entertainment Inc (OTCMKTS:REDG) Receives More Exposure

by Borislav Tonev December 5, 2014

Red Giant Entertainment Inc (OTCMKTS:REDG, REDG message board) popped up on investors' radars for the umpteenth time about a couple of weeks ago when the company announced the appointment of YouTube star Mark 'Markiplier' Fischbach to the Board of Directors. Trading has been pretty active since then and it would appear that some people are more than willing to keep the excitement going strong for a while.

Yesterday, for example, an entity called Murphy Analytics said that they are initiating a coverage on REDG and published a 25-page report. At this point, we should probably note that they didn't do it for free. According to the fine print at the very bottom of the document, Murphy Analytics was paid $5 thousand for compiling the information found in it. This is, we reckon, something you should definitely bear in mind while reading the report and making your final investment decision.

Nevertheless, let's take a closer look and see what Patrick Murphy, the author of the report, thinks about REDG. Apparently, he isn't too bothered about the revenues which, as we mentioned in our previous articles, are quite dismal. He's also not too concerned with the fact that the stock was targeted by a big promotional campaign back in 2013 which ended up parting investors from a huge amount of money.

Speaking of which, most of the people who are jumping in right now also don't pay too much attention to the poor sales and the horrific stock performance. REDG did experience a 10% correction yesterday, but it remained above the $0.002 mark, and these sort of levels were nothing more than a distant dream just a couple of weeks ago.

And here comes an interesting question: “Why is everybody disregarding some of the obvious red flags?”.

Apparently, they think that the future is much brighter. On Page 11 of Mr. Murphy's report, for example, you'll find a chart named “Potential Revenue Model”. In it, he implies that if the annual gross revenues grow to $80 million, the share price could hit more than $0.05 per share.

On the one hand, considering the current levels, a share price of more than $0.05 does sound impressive. On the other, however, the annual revenues for the last fiscal year was sitting at under $450 thousand while the gross profit amounted to just $349 thousand.

You have to agree that there is a rather huge gap between $349 thousand and $80 million, and you also have to decide for yourself whether REDG has what it takes to fill it.

There is one more thing. Mr. Murphy says that if the colossal sales figures are met, and if the margins are favorable, the stock can really reach $0.05 per share. This will only happen, however, if the O/S count stands at 3 billion (the current number of authorized shares). Judging by the rates at which stock has been issued over the last few months, this seems unlikely.

Between April 18 and July 18, the number of issued and outstanding shares grew from about 1.5 billion to more than 2.1 billion.

That's yet another thing you should probably bear in mind while contemplating a potential investment, and you should also know that while you're weighing the risks, some people might be taking their profits. As we mentioned in our previous article, in a matter of mere months, REDG turned around $815 thousand worth of debt into nearly 1.4 billion shares. The average conversion rate, in case you're wondering, stands at under $0.0006 per share.

Comments 2

1. Guest
April 13, 2015, 02:28PM

Quotes HotStocked.com loves to rip REDG. When the next run comes, they will try to disparage the company again.

2. Guest
December 07, 2014, 06:05AM

Quotes This article presents an unbiased perspective on Red Giant Entertainment. The author raises questions which truthfully, are a little disturbing but likely factual.

I did purchase shares of this company because I think this is a venture that may take a few years to realize.

Thank you to the author for his due diligence.

- Richard

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