Capital Resource Alliance Inc (OTCMKTS:CRRA) Rises on Acquisition News

At first glance, Capital Resource Alliance Inc (OTCMKTS:CRRA) doesn’t appear to be the most solid investment option out there. In fact, the company is a shell that hasn’t filed any reports for more than three years. According to the latest 10-Q, back in September 2010, they had no assets, no revenues, and an accumulated deficit of around $71 thousand.

And yet, investors seem interested in the stock. The ticker woke up at the beginning of May and last week, it registered five green sessions in a row. Nearly 7 million shares changed hands on Friday resulting in a dollar volume of more than $370 thousand. CRRA added 44% to its value in a single day and finished the week at $0.062 per share. A decent performance, no doubt, and there is a very good reason for it.

On Wednesday, the company issued its first press release in a long time and announced that a Letter of Intent for the acquisition of an enterprise called Nate’s Pancakes has been signed. Apparently, the deal should be completed within the next eleven days and a special website dedicated to the merger informs us that it will be closed with the issuance of preferred stock.

The same website also says that Nate’s Pancakes is a really solid venture that has developed numerous products in the past and has made millions from them. Indeed, it all sounds good and investors are pretty excited about the future. But are things really so simple?

Nate’s Pancakes does seem like a solid acquisition target and if the merger gets closed, CRRA might be able to finally show us some real operations. That said, you should probably keep in mind that there can be no guarantees around the completion of the deal.

On May 6, WB Partners, the entity that is apparently helping with the negotiations between the two sides, informed us that a preliminary agreement around the acquisition has been reached. They also said that it should be completed within “the next week or so“. Obviously, this didn’t happen and right now, the deal is still at the Letter of Intent phase which means that things could go horribly wrong in the blink of an eye.

Integrated Cannabis (OTCMKTS:IGPK), for example, signed a similar LOI for the acquisition of a company called iComply back on May 7, but just six days later, they announced the termination of the contract. Of course, this doesn’t necessarily mean that the same thing is about to happen to CRRA‘s deal, but with no official filings and no financial statements, bearing it in mind might not be a bad call.

Another thing you should probably consider is the company’s share structure. Although the latest 10-Q can’t give us any relevant financial information, it does tell us how much stock has been issued over the years and how it was valued. Apparently, the 61 million shares that are issued and outstanding at the moment have seen the light of day at rates ranging from $0.00008 to $0.0008 per share. This, as you can see, is quite a discount compared to the current market price.

All in all, basing your investment decision on press releases alone might not be such a good call and the people who put some money in Fusion Pharm Inc (OTCMKTS:FSPM) know that all too well. Doing a lot of research and due diligence and avoiding overinvestments is, as always, absolutely crucial.