Fortitude Group, Inc. (OTCMKTS:FRTD) Explodes On Buyout News

Despite talking about numerous business ventures that are supposed to bring in millions upon millions of revenues the stock of Fortitude Group, Inc (OTCMKTS:FRTD) was going nowhere but down. It had closed in the red 12 times out of the last 14 sessions and on Friday closed below the 1 cent mark. With the last couple of PRs having absolutely no effect on the performance of the ticker it seemed that the negative trend was going to continue. Well, it turned out that the company had one more ace up their sleeve.

On Sunday FRTD announced that a letter of intent was signed with an unnamed OTCQB company that apparently wants to buy them out. This proved to be more than enough to lure investors back and when Monday’s trading began FTRD shot through the roof. At the end of the session the stock had added more than 200% to its value closing at $0.0282. Equally as impressive was the traded volume for the day which was just a couple of million shares short of breaking the absolute record of the company of 208 million shares. Is such a buying frenzy warranted though? 

Let’s take a look at the terms of the deal. First of all the identity of the acquiring company was not revealed due to a confidentiality clause included in the letter of intent, which is not exactly an encouraging sign. An even bigger warning sign is the fact that that this mysterious company is willing to pay a minimum of 12 cents for each FRTD share. That is more than twelve times higher than the market price prior to the announcement. Not to mention that FRTD has not been able to reach such price levels even once for the past 24 months. Their 52-week high is just $0.078.

At the start of the year FRTD was in a dismal financial state:

• $1250 cash and total current assets
• $1.48 million total current liabilities
• ZERO revenues
• $376 thousand net loss

The quarterly report covering their latest business operations was supposed to be filed before May 15 but the company failed to do so. Instead they submitted a notification for late filing disclosing that the company is hiring a new accountant and “it took a bit longer than expected”. The report should be completed today but we will see if that turns out to be the case. 

The buyout has a 10-day due diligence period with the closing date for the transaction being May 30. The excitement around the company is more than likely going to continue at least for now but the numerous red flags demand careful consideration. In the past FRTD has announced multiple acquisitions and joint ventures that didn’t amount to anything. At the moment they don’t even have an official site.

When dealing with marijuana pennystocks investors shouldn’t ignore the possibility of an investigation by the SEC. Just for the past three months the Commission suspended trading in 5 companies operating in the industry with the last two being FusionPharm, Inc (OTCMKTS:FSPM) and Cannabusiness Group, Inc. (OTCMKTS:CBGI). On Friday the SEC issued their own warning about the various dangers surrounding any marijuana-related investment.