Borislav Tonev

Digipath Inc (OTCMKTS:DIGP) Baffled by the Sudden Surge of Interest

by Borislav Tonev July 30, 2014

It's been a strange week for Digipath Inc (OTCMKTS:DIGP, DIGP message board) and chances are, it's about to get stranger still.

The stock which has seen very little trading over the last few months suddenly popped on Monday. It opened with a small gap up and then, in the afternoon, it made some wild swings. At one point, it even reached $6 per share (more than 1,000% above last week's value) and then settled down at $2.50 per share (390% above Friday's close). At the same time, the dollar volume stood perilously close to $1 million which is an all-time record for the ticker.

Yesterday's trading wasn't quite as wild. DIGP opened the session with a small gap down and tried to climb above $3 per share. It failed and fluctuated throughout the day, eventually finishing at $2.65 which represents another 6% in gains. This means that the market cap now stands at a whopping $135 million.

As we mentioned yesterday, the most peculiar thing about the surge is the fact that there doesn't seem to be an immediately obvious reason for the increased interest.

In fact, DIGP's sudden explosion both in terms of share price and in terms of volume looks remarkably similar to the one CYNK Technology Corp (OTCMKTS:CYNK) showed us at the beginning of the month and we can see that lots of people are making comparisons between the two tickers. There are, however, one or two key differences.

CYNK is one of the more shady penny stocks out there. The company is based in Belize and by the looks of things, it hasn't really got any money. If you take a look through our coverage of CYNK's sudden climb, you'll see that there were also some questions around the business plan. At the same time, the stock's appreciation was so steep, that it caught the attention of more than a few established media outlets who tried and failed to contact anyone involved with the company.

DIGP is quite a bit different. Their business plan seems solid, they have stuck to it for a while, and they have been generating revenues from their products. The company's financial position, though not perfect, is not that bad and the cannabis part of their strategy might actually lead them to something. The management team's behavior is a lot different as well.

While nobody could get in touch with CYNK and ask them what's going on, DIGP decided that communicating directly with investors is the better way to go. Unfortunately, they appear to be just as surprised by the volume spike as everyone else.

A couple of hours before today's opening bell, they issued a press release (which was accompanied by an 8-K form) and said that they have no idea what's causing the sudden surge in the right direction. DIGP announced that there have been no corporate developments that could explain the increase in price and volume and that investors should trust only the information available on the company website.

All in all, the reasons for DIGP's recent performance remain unknown and there are just as many questions around the stock's future behavior. Judging by early trading today, however, the ticker might be in for a serious drop. About forty minutes after the opening bell, DIGP is sitting at $2.35 per share (11% in the red).

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