Cereplast Inc (OTCMKTS:CERP) Under Attack Once Again
Cereplast Inc (OTCMKTS:CERP) is a former NASDAQ company that has been developing a special sort of bioplastic that is compostable and should be a brilliant solution for making plastic bags for your groceries. They have had some problems throughout the years, but right now, with more and more people condemning the traditional plastic bag as too environmentally unfriendly, CERP are hoping that their alternative would be the planet’s best bet.
They could be onto something here. We see efforts from legislative organs throughout the civilized world who try to limit, if not abolish, the use of the traditional single-use bag and if CERP manage to take advantage of this fact, the future should be bright.
They are putting quite a lot of hopes on an Italian act that is supposed to ban the use of plastic bags altogether and back in April, they were saying that the legislation should be enforced during the summer of 2013. Unfortunately, their predictions turned out to be somewhat off the mark and on June 4 they issued an update on the Italian law according to which some delays were caused and the ones to blame are, apparently, the British government. The upshot is, Italians will continue to use their old-fashioned grocery bags at least until Fall this year.
Truth be told, CERP can’t really be blamed for their failure to predict the date which will mark the end of the plastic bag as we know it since this matter is not entirely up to them. Unfortunately, however, there have been some other instances when they have failed to meet the shareholders’ expectations.
As we wrote in our previous article, back in February they announced that the sales for January amount to around $800 thousand and that got quite a lot of traders excited. Volumes shot up and the ticker followed suit. When the actual report came out on May 20, however, it turned out that the figure under the Revenues section was quite a long way off what most people were expecting. While at $950 thousand, it was an increase year-over-year, the promising press releases suggested quite a lot more and the rest of the figures look pretty dismal compared to the ones found in the 10-Q for the corresponding period of 2012 as well. The cash reserves, for instance, have decreased by around 80% while the current liabilities have all but quadrupled. Things were not looking much better in terms of net losses and the effect on the share price was inevitable. The ticker slashed half of its value in just a couple of weeks with not a single green session in sight.
If you have another look at our article from June 26, you’ll see that in our humble opinion, CERP would have been better off if they let the numbers do the talking and refrain themselves from issuing their preliminary revenue projections suggesting that everything is going according to plan. Apparently, the management team disagrees.
A couple of weeks ago, they issued what they think will be the figures contained in the next 10-Q and when you compare the press release to the one with their expectations for the first quarter, it’s almost word-for-word identical. The ticker’s situation, however, is a little bit different and while it didn’t crash minutes after the announcement went online, traders aren’t exactly sharing CERP‘s enthusiasm, either.
Yesterday, however, things turned a little bit ugly and after six and a half hours of trading and 20 million shares changing hands, the price plummeted by around 18% meaning that CERP‘s current value is $0.015 per share, which is precariously close to the 52-week low experienced back in January.
Potential investors were probably put off by this drop and, after we checked the message boards we saw that long-term shareholders were properly worried, as well. A lot of posters said that they are expecting a press release to be published before today’s opening bell, and this time, CERP‘s management team didn’t disappoint. About an hour and a half before the start of today’s session a new announcement hit the websites. Apparently, CERP are injecting fresh blood into their North American Sales Team with the appointment of two new members – Mr. Reddy Tudi and Mr. Kevin Fina. According to the press release both have quite a lot of experience and they are working together on around thirty projects throughout the US, the total volume of which could exceed $10 million.
Will this projection turn out to be closer to the truth than CERP‘s previous ones? We’ll need to wait for the future financial statements to find out. Will today’s announcement bring back some of the investors’ confidence and deliver gains just like Xumanii, Inc. f/k/a Medora Corp (OTCMKTS:XUII) did yesterday? Or will it cause another crash similar to the one we saw from TheDirectory.com Inc (OTCMKTS:SEEK)? CERP‘s value around 4PM today will give us an answer to this. In any case, historic performance has shown us that a potential investment in this particular ticker is not without its risks. Make sure you consider all of them carefully before making your final decision.
