Borislav Tonev

Petro River Oil Corp (OTCBB:PTRC) Sinks On News Of A Stock Split

by Borislav Tonev August 30, 2013
8PTRC.pngWe covered Petro River Oil Corp (OTCBB:PTRC, PTRC message board) a couple of times back in July and we saw that the ticker tends to move both up and down without any immediate reason. It first reached a high of around $0.50 per share at the beginning of July and while there was a free email from Blue Horseshoe Stocks, we somehow doubt that it alone was enough to propel the ticker to such values. It then came crashing down and wiped out more than half of the price, once again being depressed neither by stock promotions, nor by any sort of press releases that might scare investors away.

What's more, on July 9, PTRC finally released the long awaited financial information which contained the capital brought in by Petro River Oil LLC, the wholly owned subsidiary that was acquired back in April, and the filing revealed that PTRC have a working capital and some revenues - things, few oil and gas penny stocks can brag about. Despite this, traders weren't impressed and after a few days, the ticker had lost around a fifth of its value.

We've witnessed much the same behavior during the last couple of sessions, but this time, the volumes appear to be bigger, the slide seems steeper and unlike the previous drops, we think that we might just know what is causing it.

A 10-K covering the period between January 1 and April 30 was filed on Wednesday and it doesn't seem to be the culprit. It's by no means perfect, but it once again proved that, unlike a lot of their mineral exploration small cap counterparts, PTRC do appear to have significant amounts of cash, a generous working capital and, most importantly, some revenues. Here's what we're talking about:

  • current assets: $5.8 million (primarily cash)
  • current liabilities: $1 million
  • revenue (Jan 1 - Apr 30): $184 thousand
  • net loss (Jan 1 - Apr 30): $2.3 million

The report reveals that they have been working on their properties since February 2012 and the amount of work that they have managed to complete during that period is not too shabby. Of course, they're by no means out of the woods, since they do have to battle those huge expenses.

All in all, the 10-K revealed a small company that is giving it its best to go up there and compete with the big boys. Of course, the report doesn't give us any guarantees that they'll manage to stick to their business plan and do everything by the book, but it's also not something that could deter the regular penny stock investor (especially the one that is more prone to risk taking).

But if it isn't the financial statement, then what caused the 24% slide from yesterday and the generally poor performance from the last couple of days? Well, once again, we can't be 100% sure, but the only thing that could possibly have scared traders away is the rather short press release that came out on Tuesday. According to it, PTRC plan to effectuate a 1 for 25 reverse stock split. It should be effective by the end of next week, but the most peculiar thing about it is the fact that the management team doesn't seem bothered with giving us a reason for this particular action. Rumors around the message boards suggest that they are doing it in order to position themselves for an uplisting on a bigger exchange, but there still seems to be no official information from the company itself.

Traders might have a reason to be anxious. Having their shares listed on one of the national exchanges will be by no means easy and if, for some reason, they fail to do that, the results could prove to be painful. In addition to this, most of the penny stocks that perform reverse splits, especially the ones that have not yet reached profitability, tend to experience violent slides shortly after the action has taken effect as the higher stock price proves to be out of reach for some people. Not to mention the fact that the decreased number of outstanding shares gives the management team more room for stock issuance and 11PSON.pngpotential dilution.

All in all, it would appear that investors are not 100% convinced that the split is the right thing to do right now and their support seems a little shaky. Fortunately for them, PTRC is still managing to stay away from paid promotions that, as evident from Petrosonic Energy Inc (OTCMKTS:PSON)'s chart on the right, could wreak absolute havoc with the stock performance.

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