Bitcoin Shop Inc (OTCMKTS:BTCS) Surges Late In The Session
Since the start of April the stock of Bitcoin Shop Inc (OTCMKTS:BTCS) has been staying mostly flat, fluctuating between $0.24 and $0.25. When yesterday’s trading began it seemed that it would follow the same pattern and indeed for most of the session the stock did exactly that. A couple of hours before the closing bell however investors suddenly rushed towards the company. The buying pressure was so strong that it pushed the stock to a close at $0.275 for a gain of over 12%.
On Wednesday BTCS announced the closing of a $2.3 million financing. The company sold a total of 7,708,342 units consisting of 1 share of common stock and 1.4 warrants at a per unit price of $0.30. Around 10.7 million shares are issuable under the warrants at an exercise price of $0.375. The significant cash injection and the fact that the units were priced higher than the market price of the stock are definitely positive signs. This is the second private placement performed by the company since the start of the year. Back in January BTCS sold 4.3 million units at $0.10. Back then each unit consisted of 1 common share and 1 warrant for the purchase of 2.5 shares with exercise price of $0.10 per share.
The annual report for 2014 that was filed on April 15 showed that the company was in a dire need of fresh funds because as of December 31 it had:
• $5403 cash
• $68 thousand total current assets
• $266 thousand total current liabilities
• $38 thousand annual revenue
• $14.7 million annual net loss
The massive amount of the reported net loss was due primarily to the stock based compensation of $13,126,445 related to the grant of 6,201,472 stock options to management on February 5, 2014 and 12,450,000 stock options on November 7, 2014.
With nearly 156 million outstanding shares as of April 20 BTCS currently command a market cap of over $40 million. Compared to the underlying fundamentals of the company such valuations may seem a bit inflated.
Even if you believe in the potential of the company you should approach their stock with caution. The company still needs to show its ability to generate meaningful revenues. The risks associated with the Bitcoin cryptocurrency itself should also be taken into consideration.
