Borislav Tonev

Carolco Pictures Inc (OTCMKTS:CRCO) Slammed Down By a Terrible Pump

by Borislav Tonev November 12, 2015

Carolco Pictures Inc (OTCMKTS:CRCO, CRCO message board) lost 67% of its value during yesterday's session and it closed the day at a little over $0.02 per share. Not what you want to see if you're contemplating an investment, and things don't get much better when you take a look at the longer-term performance. CRCO has existed under its current ticker symbol for less than ten months and during that time, it has managed to drop from over $1 per share to its current value.

Some of you will probably be a bit perplexed by this. At the end of April, CRCO announced that none other than Mario Kassar has been appointed as a Chairman of the Board and proper cinema geeks know just how famous he is. He has been working on major film franchises such as Rambo, Terminator, and Total Recall.

By the looks of things, his presence seems to be affecting his new company in a good way. During Q2, CRCO logged a year-over-year revenue jump of 60%. Press releases aren't what you'd call abundant, but they do sound positive as well.

Once you dig a bit deeper, however, you'll spot a few things that could make you think twice. Take Mr. Kassar's biography, as an example. He was once at the helm of another movie producing company. Like CRCO, it was also called Carolco Pictures, but unlike CRCO, it was traded on the New York Stock Exchange. Through it, Mr. Kassar brought the aforementioned blockbusters to the big screen, but his name was also featured in the credits of some less successful titles. As a result, the NYSE-listed Carolco experienced some financial difficulties and in 1995, it filed for bankruptcy protection.

Speaking of financial difficulties, the OTC-quoted Carolco isn't in perfect shape, either. Indeed, it managed to log about $400 thousand in revenues during Q2, but the rest of the statement is somewhat underwhelming. Here's what we mean:

cash: $242 thousand
current assets: $585 thousand
current liabilities: $1.3 million
quarterly net loss: $236 thousand

It must be said that neither Mr. Kassar's history, nor CRCO's financial statement caused yesterday's 67% drop. That was all due to a paid pump.

The newsletters that took part are owned by Micro Cap Consultants and Freedom Ventures who pocketed a little over $20 thousand. Despite the tasty compensation, the pumpers made a rather big hash of the whole thing.

We don't know whether there's a connection between the paid pump and the toxic debt that can be found in CRCO's 10-Q, but we reckon that the three convertible notes with an aggregate principal amount of $282 thousand should be borne in mind. One of them is convertible into stock at an undisclosed “lender conversion price” while the rest are a bit more conventional – they can be turned into shares at discounts that range from 39% to 50%.

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