Integrated Cannabis (OTCMKTS:IGPK) Lives to See Another Day

It’s no secret that playing with promoted penny stocks is an extremely risky undertaking. People who manage to time their trades well can sometimes cash in on some healthy profits. On the other hand, investors who tend to get a bit carried away with the excitement often end up badly burned. We reckon that the performance put on by Integrated Cannabis (OTCMKTS:IGPK) last week illustrates the point perfectly.

The $800 thousand pump is carried out by Stock Castle and it started on May 5. The market’s reaction was instantaneous. In a matter of just two days, IGPK jumped from under $0.20 to over $0.70 and it even registered a 52-week high of $0.81. At that point, a correction seemed probable, but instead of slipping down a notch, IGPK sank like a stone. Three sessions of extreme selling brought the ticker down to just $0.45 per share and even the press release from May 7 according to which IGPK is about to acquire an entity called iComply LLC, failed to break the fall.

Apparently, Stock Castle reckon that incinerating 40% of the market cap is nothing to be worried about. They said in an email from Saturday that what happened during the previous three sessions was actually an “extremely healthy pullback“. They still hold the opinion that IGPK is “a smart way to invest in cannabis” and apparently, they think that the stock is now ready to start a new run in the right direction.

It is, of course, up to you to decide whether IGPK is a smart way to invest in what is, undoubtedly, a booming industry, but if you truly believe that the company has some potential, you should probably consider one thing that Stock Castle fail to mention – the figures in the latest financial statement. Here’s what IGPK had on March 31:

• assets: $0
• liabilities: $34 thousand
• revenue: $0
• quarterly net loss: $300

In the interest of fairness, we should probably mention that the acquisition of iComply might just bring something positive for the company, but, the press release talks about a letter of intent, and not the actual signing of a deal. It fails to give us any details or deadlines for the completion of the merger which means that nothing is official as of yet.

As for the second surge that Stock Castle talked about in their email, it might just happen. We’ve seen numerous penny stocks making sudden and violent jumps which have been based on nothing more than hype and excitement. Bear in mind, however, that someone has paid a huge amount of money for pumping IGPK which means that someone out there will probably want to profit from the campaign. Who could that be?

We can’t be sure, but a quick comparison between the report for the third quarter of 2013 and the annual statement reveals that during Q4, the float grew from around 1.6 million shares to over 81 million shares. There’s no information on who and why got the newly issued stock, but we reckon that keeping it in mind while planning your strategy might not be a bad call.

There’s another problem as well. As you probably know, two of Stock Castle’s last picks, Imogo Mobile Technologies Corp (OTCMKTS:IMTC) and Nevada Gold Corp (OTCMKTS:NVGC), got suspended by the SEC during the peak of their promotions. A lot of people expected IGPK to follow in their footsteps at the end of last week. So far, the Commission is allowing the pump to continue, but there’s no telling when they might decide to step in. That’s why, treading carefully is absolutely essential.