HyperSolar Inc (OTCMKTS:HYSR) Soars Dangerously High

As you probably know, a single press release can change the market sentiment towards a penny stock in no time. This point was perfectly illustrated by HyperSolar Inc (OTCMKTS:HYSR)’s performance from yesterday.

A few hours before the opening bell, HYSR‘s management team decided to announce how happy they are about the growing demand for hydrogen among big companies and this, it seems, was enough to propel the ticker out of the sub-penny levels and on to heights that have not been visited for more than a year. The price increased by a mind-bending 429% and it currently stands at $0.027 per share. The 138 million shares that changed hands brought the dollar volume to more than $3.2 million which is an absolute record for HYSR.

It’s clear that the people who got in early and made a quick exit are now quite happy, but there are probably many investors who decided to hold on to the ticker in hope of a more prolonged run in the right direction. Will they be just as (if not more) cheerful?

We can definitely spot some issues. For one, the huge jump from yesterday is somewhat hard to explain. Indeed, HYSR‘s management team talks at some considerable length about huge companies like Wal-Mart Stores, Inc. (NYSE:WMT) who are taking some steps towards adopting hydrogen as a viable source of energy, but in reality, HyperSolar has not yet signed any agreements that could potentially bring the start of the revenue generation closer.

What’s more, HYSR‘s technology that, supposedly, produces hydrogen with the help of the sun isn’t really ready. They issue press releases on almost a monthly basis and they tell us each time that they are “getting closer” and that they are “achieving milestones“, but they’re unable to provide us with any concrete deadlines for the commercialization of the clever solutions.

This is a complicated process that requires quite a lot of time and money and this brings us on to the latest 10-Q. It shows that as of December 31, HYSR‘s financial situation wasn’t really that good. Here are the figures:

• cash: $57 thousand
• current assets: $62 thousand
• current liabilities: $1.8 million
• quarterly operating loss: $127 thousand

It’s fair to say that, with the latest financials in mind, a drop in the share price seems almost inevitable. If you check out the rest of the report, however, you’ll see that the dangers are even bigger.

In just four months, HYSR managed to issue a whopping 100 million new common shares. Between January 1 and February 4 alone, they printed more than 50 million shares and most of them saw the light of day either as a conversion of debt (the rates range from $0.002 to $0.0032 per share), or as a cashless conversion of purchase warrants.

That is a lot of dilution and there are signs that the stock issuance won’t stop here. HYSR still borrow money through convertible notes that can be turned into equity at a discount and they recently increased the number of authorized shares from 500 million to 1 billion.

You can see that there’s no shortage of people who can benefit from the inflated share price. There are a lot of things to suggest, however, that the regular investor who got a bit too excited by yesterday’s press release isn’t one of them. Make sure you do a lot of due diligence before putting any money on the line.