Borislav Tonev

Service Team Inc (OTCMKTS:SVTE) Blasts Out of Sub-Penny Land

by Borislav Tonev February 11, 2016

Yesterday, investors traded more than 10.5 million Service Team Inc (OTCMKTS:SVTE, SVTE message board) shares which is about fourteen times the thirty-day average. They pushed the stock on a 136% climb which means that SVTE is now back above the critical $0.01 barrier.

That's something of a surprise. Compared to the horrific lack of interest shown over the last months, the spike was pretty enormous and yet, it wasn't caused by anything immediately obvious. There was no news, no filings, and no promotions. Basically, pinpointing the reason for the sudden increase in interest is a difficult task. There are a few things to suggest, however, (and we know that we don't say this too often on these pages) that SVTE deserves the attention.

The latest 10-Q, for example, shows that on November 30, the company had:

  • cash: $22 thousand
  • current assets: $227 thousand
  • current liabilities: $285 thousand
  • quarterly revenues: $925 thousand
  • quarterly net income: $115 thousand

Sales have gone up by a whopping 67% compared to the figures recorded during the same period of 2014 and although profitability isn't consistent, seeing a net income in the 10-Q every now and then is something penny stock investors would certainly appreciate. All in all, it would appear that when the management team decided to take on the business of building and repairing truck bodies, they made a wise choice.

Why, then, did the stock stay illiquid for so long before yesterday's sudden surge?

There are a few rough patches in the company's history. Robert Cashman, SVTE's Chairman of the Board, and Carlos Arreola who recently resigned from his positions at the company have been named in a complaint alleging, among other things, breach of fiduciary duty. Hallmark Venture Group, an affiliated entity, sold some shares of the company's common stock without disclosing the necessary information which led to a Desist and Refrain Order from the State of California. The State of Colorado also issued a Cease and Desist Order against SVTE after an employee who was not a licensed broker sold 50 thousand shares to what was reported to be an old widow.

All these things could be making some investors feel a bit uneasy, and the ones who have gone through the latest 10-Q in its entirety might be even more scared. The report says that between July 2014 and July 2015, SVTE picked up just under $180 thousand worth of debt. All of it is now held by unaffiliated parties and it's convertible into shares at discounts ranging from 45% to 50% which means that there might be a... err... truckload of stock waiting to be unleashed on the open market. Make sure you tread carefully.

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