CGrowth Capital Inc (OTCMKTS:CGRA) With a Disheartening Drop
CGrowth Capital Inc (OTCMKTS:CGRA) issued a press release the other day and said that according to independent third parties, the company’s magnesium dolomite mine is worth around $2.7 billion (that’s “billion” with a “B”). The announcement came out after the closing bell which means that it didn’t really have any effect on Tuesday’s performance. To say that plenty of people were eagerly awaiting the start of yesterday’s session, however, would be an understatement.
Unfortunately, they were all left disappointed. CGRA opened the day with a gap up and during the first few minutes, it tried to move in the right direction. Sadly, it lost steam rather quickly and it tumbled downhill. It eventually stopped at $0.0035 (12% below Tuesday’s value). In light of the news, the performance is absolutely atrocious, and, somewhat understandably, investors are now speculating on the potential reasons for the drop.
Some are saying that the whole thing was caused by an attack from the short sellers. Others reckon that the press release simply wasn’t spread around properly which is why they paid $2 thousand in exchange for a small-scale pump carried out by Small Cap Crowd and its sister newsletters.
Surprisingly or not, the people speculating on yesterday’s slip don’t think that it has anything to do with CGRA‘s pitiful cash reserves at the end of Q1. They don’t reckon that the $1.7 million working capital deficit or the dismal revenues are to blame, either.
They all argue that a company with more than $2.7 billion in assets should be traded at more than a third of a penny, and indeed, if you take the O/S count and do a simple calculation, you’ll see that, in theory, the share price should be much more substantial. Making the right investment decision, however, requires a little bit more than theorizing and using the calculator. It requires research and due diligence and unfortunately, that’s where things start to go wrong for CGRA.
We already mentioned that the figures in the latest financial report aren’t really pushing the ticker in the right direction and neither does the fact that between August 14, 2014 and March 10, 2015, CGRA converted $79,048 worth of debt into 148,045,720 free trading shares of common stock. To put things into perspective, this means that around 40% of the total O/S count and 65% of the float reported at the end of Q1 saw the light of day at an average rate of $0.0005 per share.
In light of this, the price targets of well over $1 that some people are placing on CGRA sound somewhat unrealistic. And they will get downright ridiculous if the rest of the debt gets converted into discounted stock.
