Bitcoin Shop Inc (OTCMKTS:BTCS) Digs Deeper
As you probably know, the bitcoin business has been among the hottest topics in Pennyland since the beginning of 2014. On February 5, Bitcoin Shop Inc (OTCMKTS:BTCS) (which was previously known as TouchIT Technologies Inc) decided to take full advantage of this.
A reverse merger was completed and the people behind BTCS started advertising the company as the first publicly traded enterprise dealing with the virtual currency. This, apparently, was enough to draw the attention of big media outlets like Wall Street Journal and Bloomberg. The new CEO, Charles Allen, made numerous appearances and gave some interviews.
In addition to the reverse merger, the Board of Directors of what was then known as TouchIT Technologies decided to effectuate a 1 for 300 reverse stock split which meant that the number of issued and outstanding shares was, at one point, just 762,805. That’s what investors thought and that is what the company’s OTC Markets profile said.
The extremely low O/S count, coupled with the huge publicity and the general hype and excitement around the virtual currency pushed the stock (which was then traded under the TUCND ticker) on a remarkable run. Just two days after the completion of the reverse merger, it hit an all time high of $5.26 per share. Excitement was strong and a lot of people thought that this was just the beginning.
Unfortunately, something went terribly wrong. The ticker changed direction violently and started losing ground quickly. It managed to wipe out 66% of its value in less than two weeks. The slide continued and some people were hoping that the new symbol (which became effective yesterday) will break the fall, but unfortunately, that didn’t happen. During the first session under the BITC ticker, the share price dropped by another 14% and slipped under the $1 mark for the first time since the acquisition of the Bitcoin Shop website. That is quite a drop, but what caused it?
Well, apparently, at one point, people realized that the number of issued an outstanding common shares isn’t really that small. In fact, it amounts to more than 100 million which results in a colossal market cap for a company that has been in its current business for no more than a month. Naturally enough, a lot of selling ensued which pushed the price down. But what about the future? Where is BTCS heading next?
The discussion on message boards is heated up. Some investors are understandably angry with the fact that they lost a lot of money on BTCS. Others, however, argue that the big O/S count isn’t such a big problem since the majority of the stock is restricted or under a lock-up agreement and, truth be told, they do have a point as well.
One thing is for sure – there are still a lot of unknowns around BTCS‘ share structure and until everything is clear enough, a potential investment remains quite risky. And speaking of risk, we should mention the potential problems around BTCS‘ business operations as well.
The bitcoin industry has been taking a lot of hits recently. Mt. Gox, a major exchange for the virtual currency, was forced to seek bankruptcy protection after their system got compromised a couple of weeks ago. On Tuesday, another exchange called Flexcoin also had to shut down due to an online attack from hackers. A lot of money was lost along the way and people are now a bit more suspicious about the whole thing.
Indeed, BTCS is not a bitcoin exchange, but we can imagine that the recent developments will (if they haven’t already) affect their business. Credibility is everything at the moment and the fact that BTCS‘ principal office is located in a residential house isn’t really helping. The thing you should bear in mind the most, however, is the lack of any current financial information. The acquisition of the bitcoin shop was completed just a month ago which means that we’ve no idea how it’s doing at the moment.
The future financial statements should definitely give us a better view of the company. Until then, being careful might not be a bad call.
