Borislav Tonev

Sito Mobile Ltd (OTCBB:SITO) Sinks Despite Pump and PR

by Borislav Tonev January 16, 2015

Sito Mobile Ltd (OTCBB:SITO, SITO message board) isn't the best performing stock out there. And that's putting it mildly. The ticker registered its current 52-week high exactly twelve months ago when it nearly broke through the $0.70 per share barrier. Two weeks ago, it bottomed out at just over $0.15. In Pennyland, even badly performing stocks often peak because of optimistic announcements or paid pumps, but it would appear that SITO is impervious to these factors as well.

Yesterday, the company said that it has received the data from their holiday mobile marketing campaign and reported that it has been a resounding success. SITO said that their clients should be ecstatic.

The announcement was incredibly well-timed because it coincided with a paid promotion carried out by 007 Stock Chat as well as the newsletters owned by Action Media Holdings. The total budget stands at $24 thousand, and that's not a small amount for an email pump. Despite this, the awareness failed to push SITO in the right direction.

At $264 thousand, the dollar volume wasn't too bad, but the stock failed to impress investors. In fact, it shrank by about 7% and finished the day at $0.18 per share. So, where to next?

We can see that some people will probably be pretty happy to see SITO sink further down. About ten minutes after yesterday's closing bell, a Seeking Alpha article appeared, and it's fairly safe to say that it didn't exactly praise the company. It was written by an entity called Investor Protection Association which discloses a short position, so the motive behind the negative coverage is pretty clear. Whether Investor Protection Association's attack can affect SITO's performance is for time to tell.

We should probably note at this point that while the chart is indeed pretty disappointing, the company does have some things going for it. Here, for example is a summary of the results for the year ended September 30, 2014:

  • cash: $620 thousand
  • current assets: $3.3 million
  • current liabilities: $7.4 million
  • yearly revenue: $9.8 million
  • yearly net loss: $4.5 million

The figures are far from perfect, but the 27% year-over-year revenue growth does suggest that progress is being made.

The 10-K also shows that SITO's management team has been surprisingly successful at protecting shareholders from dilution. Apart from 2 million warrants that were exercised at an average price of around $0.10, there is no issuance of discounted stock for the reported year. In September, there were some notes convertible into stock at $0.50 per share, but SITO later announced that they will be replaced with non-dilutive debt.

So, there definitely are one or two things you might like about SITO. Don't forget, however, that the stock is the target of a paid pump, and that, more often than not, these sort of campaigns end in tears. Another thing you should bear in mind is the planned reverse split. It still hasn't been approved by the shareholders and it's supposed to help the company uplist the ticker to one of the national exchanges. Even so, it might not be to everyone's liking.

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