Borislav Tonev

Pumpers Play with Spiral Toys Inc (OTCBB:STOY)

by Borislav Tonev February 11, 2015

Spiral Toys Inc (OTCBB:STOY, STOY message board) officially announced its new name and ticker symbol a couple of weeks ago. At first, nobody was paying attention, but then, the paid promoters started... err... toying with the idea of pumping the stock, and everything changed in an instant.

Yesterday, investors traded more than 630 thousand shares which means that STOY closed the session with a dollar volume of over $440 thousand. The performance was quite remarkable as well. The stock opened the day at $0.58, started climbing the charts, and never looked back. The closing bell stopped it at its high of the day of more than $0.87 which is just over 50% above Monday's close.

Not bad at all, but as we mentioned already, the spike was caused mostly by the paid promoters. Stock Chat received $50 thousand and set up a landing page. Curiously enough, the fine print under the email alerts we received yesterday states that Stock Chat intends to distribute 100% of its monetary compensation among smaller outfits. Apparently, it will rely on the 120,000 restricted shares that it owns.

It should be noted that the promoters received a helping hand from the company. Three hours before the opening bell, STOY announced a partnership with a Chinese company that will help them implement near-field communication (NFC) in their hi-tech toys. Sounds good, but does it mean that STOY deserves that much attention?

Let's take a look at the latest 10-Q and find out. Here's what the company had at the end of the third quarter of last year:

  • $70 thousand in cash
  • $3.7 million in goodwill
  • $397 thousand in current liabilities
  • $98 thousand in quarterly revenues
  • a quarterly net loss of $219 thousand

There are indeed some revenues, but they are far from enough to offset the operating expenses. The balance sheet, with only $69,730 in current assets, is even more worrying. We should probably note, however, that after the end of Q3, STOY managed to raise some cash. On November 21, they completed a private placement and received $735,000.

For reasons that are not particularly clear, the management team didn't report the transaction until December 31, but despite this, the fresh cash injection should help the company continue with its business plan. The thing is, STOY raised the money by selling shares at $0.15 a pop and that, as you might have calculated already, is about 82% below the current market price. A closer look reveals that more discounted stock has seen the light of day over the years.

Back in 2013, when the company was still called Rocap Marketing and when it was trying to get its stock listed on the OTC Markets, some people bought around 2 million shares at $0.10 a piece. And if you follow the stock transactions around the reverse merger from last year, you'll see that the former management team should still be holding on to quite a lot of shares. They can also convert about $120 thousand worth of debt into stock at $0.25 per share. So, there's no shortage of people who can profit from STOY's current price.

And now, inevitably, we arrive at an interesting question – Will those people take advantage of the paid pump and unleash their holdings on the open market? Or will they stick around and... play ball?

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