Fastfunds Financial Corporation (OTCMKTS:FFFC) Hesitates, Then Recovers
It’s been nine days since Fastfunds Financial Corporation (OTCMKTS:FFFC) came up with a press release according to which they have formed a wholly owned subsidiary that will provide marijuana startup businesses with some financing. Since then, FFFC‘s stock has been on fire.
The news of the marijuana venture woke up the ticker which, up until then, was virtually dormant and just a few hours after the press release hit the wire, the price was already up by 200%. It cooled off a bit during the following days but on Monday, it managed to close the day above the $0.001 per share mark for the first time in three months. A couple of days of corrections followed, but yesterday FFFC recovered nicely and finished the session at $0.0014 per share.
The cumulative dollar volume for the last seven sessions hovers around $5.8 million and while this is not that much compared to other penny stocks like Medical Marijuana Inc (OTCMKTS:MJNA) and Provectus Pharmaceuticals, Inc. (OTCMKTS:PVCT) who sometimes shift tens of millions of dollars a day, it is still quite a lot for a company that doesn’t seem to have a functioning website.
It is also a bit of a stretch for an enterprise with less than $3 thousand in the bank and around $10 million in current liabilities.
In fact, lots of money is at stake and FFFC doesn’t seem to have what it takes to convince us that the investment really is worthwhile. It’s clear that the company is in a world of financial troubles and although they did announce that they have secured some funding for future projects, they fail to give us any details on the deal – something that the shareholders should probably know. Especially when you have in mind FFFC‘s previous financing contracts.
When you open the latest quarterly report, you’ll see that they have issued plenty of notes to Asher Enterprises – an entity that has a reputation of a toxic financing provider. Virtually all the notes can be turned into common stock with a 50% discount which means that the creditors could be in for a healthy profit. Especially now, when the share price is inflated by the marijuana hype.
The name “Asher Enterprises” appears in the filings of numerous small cap enterprises and having gone through the reports published by some of them, we can see that they are all plagued by severe dilution. Cereplast Inc (OTCMKTS:CERP) is a prime example. Between November 2012 and November 2013, for example, their number of outstanding shares grew from just 34 million all the way to 994 million. As you can see from the chart on the right, this has had a devastating effect on the stock performance.
And that brings us neatly to FFFC‘s own share structure. According to the latest 10-Q the number of outstanding shares stands at 663 million, but on January 22, when they announced their entrance into the marijuana business, the ticker registered 2.3 billion shares in trading volume. It is not impossible for the daily volume to exceed the float, but it’s an extremely rare occurrence which means that some more stock might have seen the light of day after the publishing of the report.
Of course, at the moment, this is only speculation, but back in October, the management team did announce that the number of authorized shares has been increased from 900 million to 2.5 billion. Since then, there has been no information about changes in the share structure, but according to Nevada’s Secretary of State’s website, the authorized capital stands at 6 billion at the moment.
All in all, for all the buzz and excitement, there are quite a lot of things that could warrant some extra caution. Doing a lot of due diligence and weighing the risks carefully is, as always, absolutely crucial.
