DNA Brands, Inc. (OTCMKTS:DNAX) is in Grave Danger

DNA Brands, Inc. (OTCMKTS:DNAX) started the week on an extremely positive note. On Monday, the company announced a distribution agreement with an entity called Trenton Coca-Cola and this resulted in a huge 525% jump.

The excessive hype was most likely caused by the presence of the words “Coca” and “Cola” and although we mentioned yesterday that the distributor in question is a separate entity from The Coca-Cola Company (NYSE:KO), investors seemed really excited about the future.

Tuesday’s session brought a dollar volume of around $3.2 million and a price drop of a whopping 38%. This wasn’t exactly the performance everybody expected, but nevertheless, some people still reckoned that everything is alright. They said that yesterday’s crash is nothing more than a consolidation that will precede a more prolonged run in the right direction.

They might want to think again.

A couple of hours after yesterday’s closing bell, DNAX issued a press release with which they said that the deal with Trenton Coca-Cola doesn’t really exist. Apparently, none of the things listed in Monday’s announcement correspond to reality.

DNAX‘s CEO, Eric Fowler even informed us that Chuck Jones who, according to Monday’s PR, is the President of Trenton Coca-Cola doesn’t hold that position. Mr. Fowler also “apologized” for the “misunderstanding“.

You are the one to decide whether you want to accept his “apology” and you should probably think about whether “misunderstanding” really is the right word to describe the whole thing.

Even though, generally speaking, small cap OTC-listed companies are one of the riskiest ways to play on the stock markets, such things don’t happen every day. Needless to say, the activity around the message boards and the social media is huge and a lot of people are understandably upset about the mess that DNAX have created. Many investors reckon that the SEC will (some say that it should) step in a put a suspension on the stock.

As of the time of writing this article, this hasn’t happened, but it should be noted that the Commission isn’t exactly renowned for its cat-like reflexes which means that a suspension in the coming days is not out of the question. But what will happen if DNAX actually manage to get away with it and trading continues?

Things are not looking good. About twenty minutes after today’s opening bell, the ticker is sitting at $0.0039 (60% below yesterday’s close) and it’s showing no signs of slowing down. Considering people’s reaction towards yesterday’s press release, we won’t be too surprised if the drop continues over the next couple of days.

The longer term prospects aren’t that good either. The company credibility is shattered and even if it wasn’t, the dilution that we talked about in our previous articles is sure to put additional pressure on the price. Right now, this is the last thing DNAX needs.