Hemp Inc (OTCMKTS:HEMP) Reverses Its Direction

After climbing up the chart for several sessions yesterday Hemp Inc (OTCMKTS:HEMP) suffered a sizable correction closing nearly 11% in the red at $0.065 per share. The drop shouldn’t have been such a surprise having in mind that the stock’s ascent was supported by nothing more than fluff PRs.

Being at the forefront of the marijuana craze from last year HEMP has continued to receive a lot of attention from the market. That, however, has not been enough to keep the company from sliding lower and lower down the chart. In fact, the current share price of the stock is the lowest for the past four years. Not to mention that HEMP‘s price was further bumped up by a 10-for-1 reverse split performed at July.

The reverse split coupled with the increase of the authorized shares to 5.5 BILLION authorized earlier in the year freed up a lot of room for the issuance of more shares. Through the years the shareholders of the company have been plagued by the severe dilution of the common stock caused by the conversion of preferred and preferred K shares. 1 preferred K share can be turned into 10 common shares and with over 214 million preferred K shares outstanding at the end of June the potential dilution is indeed massive.

Not to mention that nearly $2.3 million out of the $2.53 million current liabilities for the second quarter of the year consisted of debt owed to the CEO of the company. Historically such debt has been reduced by, and you might have guessed it, the issuance of preferred K shares.

There are many investors that still believe in the potential of HEMP especially with the company stating that its Temafa decortication line should become operational by the end of the year. It might be wise to keep in mind that the reassembly of the decortication line suffered through quite a lot of delays in the past and according to the latest update from the company “unexpected delays” could still push the completion of the plant into the first quarter of 2016.

HEMP is a volatile stock and any positive industry-wide events could very well push the stock in the right direction once more. The numerous red flags however should not be taken lightly and before putting any money on the line you should do extensive due diligence.