Arch Therapeutics Inc. (OTCBB:ARTH) Stumbles Hard

Arch Therapeutics Inc. (OTCBB:ARTH) lost 12.50% of its market value yesterday, on a heavy dollar volume, in spite of the lack of developments surrounding the company.

Since there are no news, filings or social media events related to ARTH and the company’s management team has been quiet for more than a week now, the ticker’s crash can likely be attributed to something more insidious.

Let’s take a look at some facts. At the end of June, ARTH made a placement and sold 14.4 million units, each one of which consisted of 1 common share and 1 Series D warrant for the purchase of 1 share for exactly $0.25. In the last six months or so 10 million shares have been issued through the exercising of of Series A and Series C warrants alone. The good news is that as a result ARTH has received $2 million worth of funds to fund its operations. However, as of August 5 the company had around 100.6 million outstanding shares.

Which brings us to the point. There is still plenty of ARTH debt floating around, and the ticker’s upward movements in the last few sessions had created an excellent opportunity for noteholders to do what OTC Markets investors fear most – convert outstanding debt into stock below current market prices and then dump it on the market.

Of course, there’s no way to know that this is exactly what happened yesterday, but the timing of the crash looks awfully suspicious, so investors would do well to consider this very real possibility.