Hemp Inc (OTCMKTS:HEMP) Reverses Its Direction And Crashes
The news that North Carolina had approved the legalization of CBD/Hemp Oil had an immediate effect on the performance of Hemp Inc (OTCMTKS:HEMP)’s stock and on Monday it surged by 36% on an unprecedented for the past 8 months volume of more than 77 million shares. In our article, however, we warned to you be extremely careful when approaching the ticker.
It seems that we were right and yesterday HEMP plunged towards the bottom of the chart crashing by nearly 20% and closing at $0.0165. If the excitement continues to dissipate further corrections could follow. Compared to its high of over 0.045 posted back in January the stock is currently sitting more than 58% down.
The risks surrounding the company are truly enormous. The latest quarterly report showed that for the first three months of 2015 HEMP have managed to generate just $6223 in revenues. At the same time the net loss for the period was $1.08 million. At least the reassembly of the Temafa decortication line the company bought over a year ago is moving forward and according to the latest video update around 60% of the process has been completed.
Even if you believe that the Temafa decorticator will be able to generate some impressive revenues when it gets operational, keep in mind that HEMP will use the equipment to process kenaf until hemp gets legalized in North Carolina, the stock could still be pushed downwards by the continued dilution.
As of March 31 HEMP’s outstanding shares surpassed 2.7 BILLION out of the 3 billion authorized. In order to have more room for future issuances the company decided to increase it authorized shares to 5.5 BILLION. With 108 million preferred shares and over 150 million preferred K shares outstanding according to the latest financial report quite a lot of shares could indeed see the light of day. Each preferred share can be turned into 2.5 common shares while 1 preferred K share can be converted into 10 common shares. Investors should also keep in mind that the restated quarterly report revealed that HEMP owes more than $2 million to its CEO which could mean that Mr. Bruce Perlowin might receive even more preferred K shares.
HEMP is a volatile stock that demands extensive due diligence to be done before any trades are attempted.
