Falconridge Oil Technologies Corp. (OTCMKTS:FROT) Plummets Before The Holiday
Yesterday the stock of Falconridge Oil Technologies Corp. (OTCMKTS:FROT) lost the ground under its feet and crashed hard. The stock tanked right from the opening bell and registered its lowest point for the day of $0.86. Although it clawed its way to a close above a dollar at $1.03 it was still sitting nearly 20% in the red.
FROT has been the target of a paid pump since early-October and we have been warning our readers that the artificial hype cannot sustain the current valuations of the stock for long. Two weeks ago the company already suffered a severe crash when in just three sessions it dropped from $1.23 to $0.76 per share wiping almost 40% of its value.
Back then thanks to a couple of email alerts the ticker was able to recover but now when it is going down for the second time it may not be that easy. The landing page that signaled the start of the promotion, however, is still online which could mean that the pumpers are not giving up. There hasn’t been a total production budget disclosed for the pump but the disclaimer at the bottom of the Moskowitz Report page reveals a weekly budget of $125 thousand.
Even after the massive loss from yesterday the company is still commanding a market cap of $50 million, a number that is grossly over-inflated. In order to realize how ridiculous that valuation truly is just take a short look at the latest quarterly report filed by FROT. It covers the period ending August 31 and contains the following financial results:
• $979 cash!!!
• $11 580 total current assets
• $1.8 million total current liabilities
• $1497 revenues
• $57 thousand net loss
But being a pumped stock usually means that the red flags run far deeper than the lackluster financials. Back in 2008 FROT sold 3.5 million shares to a group of investors for just $65 thousand in proceeds, or in other words each share was priced at approximately $0.02. Although already extremely cheap they became even more so thanks to the 6-for-1 forward stock split performed in 2010. It turned those 3.5 million shares into more than 19 million representing a significant portion of the 49 million outstanding shares reported as of October 22, this year.
Taking into account the fact that FROT has been trading extremely thinly it is more than likely that the people who bought those shares still own the majority of them and could reap massive profits at the moment.
We will see if the stock will manage to slow down its fall when the market reopens on Friday. Even if it does the red flags around the company should not be underestimated. Use caution and weigh all the risks before committing to any trades.
