iHookup Social Inc (OTCMKTS:HKUP) Spikes Up Yet Again

There’s been no shortage of good news around iHookup Social Inc (OTCMKTS:HKUP) over the last two months. At the beginning of September, the company informed us that the strategy of lowering the subscription prices is working and that the registered user base is growing.

Several records in respect to the downloads were later broken and HKUP tried to spice things up a little bit by announcing things like the future compatibility of their app with the Apple Watch. Yesterday, the company said that their dating service has reached the Number 9 slot on the most downloaded paid social networking applications for iOS.

All in all, if the press releases are anything to go by, the company is moving forward. Unfortunately, the same thing can’t be said about the stock. The big announcements did result in a few spikes here and there, but the overall performance is pretty appalling. During the first few sessions of September, HKUP stood at over $0.02 per share. Right now, despite the 80% jump yesterday, it’s sitting at under $0.005. In other words, HKUP wiped out more than two-thirds of its market cap in less than two months. You’re probably wondering why.

There could be a number of reasons. For one, if you try to look for iHookup reviews on Google, you might stumble upon some comments about a dating website called iHookup.com/iHookup.net. A quick look at the first few results reveals that quite a lot of people were left more than a little disappointed with the services. At this point, we should note that there’s nothing that could definitively point to a connection between the aforementioned website and HKUP, but the similar names might lead some people to believe that there is one.

And while we’re on the subject of reviews, we can’t fail to mention the fact that HKUP‘s own dating application isn’t doing particularly well on that front. According to the App Store, the paid version of the app has only one and a half stars after 1,790 ratings.

As you can see, there are a few things that could potentially scare some of the investors away. But can the management team do something about it and change the way people perceive the company and its application?

We’re about to find out. One thing is for sure, though – they will have their work cut out for them. After all, the credibility of the mobile app isn’t the only problem.

Let’s take a look at the share structure and the changes it has gone through over the last few months. On April 29, HKUP effectuated a 1 for 20 reverse split and immediately after it, the number of issued and outstanding shares stood at just under 47 million. On August 11, it was sitting at more than 106 million which means that in a matter of a little over three months, the company managed to issue nearly 60 million shares. The exuberant stock printing didn’t stop there, though. According to a Schedule 13 form filed on October 3, four weeks ago, the O/S count stood at over 154 million. During yesterday’s session alone, investors traded more than 146 million shares, so we won’t be too surprised if it has grown further since then.

As is often the case, one of the main reasons for the heavy dilution is toxic debt. We mentioned in our previous articles that HKUP has accumulated quite a lot of notes which can be turned into common stock at a discount and we can see from a few recent 8-K forms that the management team is acquiring yet more convertible debt.

Apparently, this fact isn’t bothering investors too much (about fifteen minutes after today’s opening bell, HKUP is a further 21% in the green). Still, we reckon that considering the catastrophic dilution and its effects on the stock is absolutely essential.