Borislav Tonev

Pershing Gold Corp (OTCMKTS:PGLC) Still Traded Actively

by Borislav Tonev September 5, 2013
1PGLC.pngInvestors tend to be quite careful around penny stocks and, to some extent, rightly so. We see countless people getting burnt every day because they trust shady entities telling everyone that this or that small cap venture is going to become a leader in this or that industry. In most cases, the public companies in question are in a terrible financial state, which means that sooner or later, it all falls to pieces.

Probably that's why, when Pershing Gold Corp (OTCMKTS:PGLC, PGLC message board) announced on July 24 that they're starting their drilling program (a huge milestone for any junior mining venture), nobody could care less. The trading volumes over the next couple of sessions were dismal and the price remained practically stationary.

The announcement about the $11 million private placement from August 27, however, caused a completely different reaction. The press release came out an hour and a half before the start of the session and when the opening bell rang, the ticker was already about 6.8% above the previous close. When trading seized, PGLC was pretty much back where it started, but throughout the day, the increased volume had pushed it up to an intraday high of $0.42. People were generally excited and were expecting to see more consistent moves in the green direction. For some reason, however, the number of shares changing hands decreased over the next couple of days and instead of going further up, it registered a red session on August 29.

We can't be sure if the 4% losses were the reason for this Seeking Alpha article or not, but it did come out on August 30 and it immediately appeared on the company's Yahoo! Finance profile. It was written by a contributor who calls himself/herself Devon Shire and it would appear that he/she does seem to trust PGLC and its management team.

In some aspects, his/her narrative resembles the optimistic predictions that we read from the pumpers day in and day out, but on the bright side, the author does seem to have his/her feet on the ground unlike the promotional outfits and their emails.

Truth be told, we can somewhat understand the enthusiasm. We already wrote about the fact that PGLC's latest 10-Q does contain a relatively strong balance sheet. The recent private placement means that the next report should present us with an even better selection of figures and a lot of people (Devon Shire included) are generally excited about the fact that one of the company's co-founders, Mr. Barry Honig is one of the biggest buyers in the recent sale of equities.

0PGLC_logo.pngTheir arguments dictate that the price of the shares sold hovers around the current market value and since insiders have decided to buy the stock at these figures, they are expecting to see the ticker move up in the future. You can see for yourself that they do have a point. The only problem is, as Devon Shire also points out, there can be no guarantees that the drilling process will yield the expected results and even if it does, according to the management team, the revenues won't start flowing until the first half of 2014. All the shareholders can do right now is hope that the fresh proceeds from the private placement will be enough and that PGLC's projections will be spot-on. As for the potential investors, they shouldn't forget that this is still a penny stock carrying its inherent risks and, as ever, considering all of them carefully is a must before putting any money in the ticker.

One such danger is the threat of a paid promotion. PGLC has been pumped in the past and if you check out the two-year chart, you'll see that the performance wasn't what you'd call "spectacular". Let's hope that similar flops will be avoided in the future. Other, more recent promotional failures include Bluforest, Inc. (OTCMKTS:BLUF) and Arch Therapeutics Inc (OTCBB:ARTH) - two tickers that are currently digging deep below their pre-pump values.

Comments 0

Type the characters that you see in the box (5 characters).