Investors Return to Hemp Inc (OTCMKTS:HEMP)
Since the start of May the stock of Hemp Inc (OTCMKTS:HEMP) has been having a really hard time breaking through the $0.02 per share mark. Yesterday however after a relatively calm start of the session the ticker exploded and surged upwards. By the time of the closing bell HEMP were sitting at $0.025 for a gain of 18.4%. The traded volume for the day of 33 million shares was more than three times higher than the 30-day average and over 9 times higher than the 3.9 million shares traded last Friday. So what caused the drastic change in investors’ sentiment?
Nothing done by HEMP, that’s for sure. The main reason why investors were so excited during yesterday’s trading was a PR published by another pennystock – Medical Marijuana Inc (OTCMKTS:MJNA). They announced that one of their cannabis products was approved for import by Brazil’s federal government and is going to be used as a prescription for approved medical indications. The hype generated by the news managed to lift several of the companies operating in the legal marijuana and cannabis sector. But how long will HEMP manage to keep their upwards direction before the red flags around the company start to scare investors off once more?
And the risks surrounding HEMP are quite serious indeed. Let’s start with the fact that for the second half of 2014 their revenues amounted to less than $100 thousand. At the same time at the end of December the company had less than $250 thousand in cash and an annual net loss of $904 thousand. How has the company been doing in 2015 though? Well, we could have been able to answer that question if the quarterly report for the period was submitted on time. The final date for the report was May 15. Currently there is no explanation for the missing quarterly because HEMP did not submitted a notification of late filing, either.
The quarterly was supposed to answer another extremely important question – how many shares have seen the light of day during the past couple of months. The dilution of HEMP’s common stock has been nothing short of devastating. Last year around 900 million new shares got issued and as a result the outstanding shares of the company surpassed 2.7 BILLION. If the company has continued to print shares at the same rate soon they will have to increase their authorized amount of 3 BILLION shares.
The reassembly of HEMP’s Temafa decortication line, which was bought nearly a year ago, is also experiencing delays. The company expected a team of engineers to arrive at their facility by the end of April. That didn’t happen however and according to the update published on May 11 the Temafa engineer was now set to arrive on May 16. We will see if a new PR announcing the arrival of the engineer will be issued this week.
If you are determined to play the stock of the company be sure to do extensive due diligence. The numerous risks must be taken into account before any money is put on the line. Keep in mind that without the hype HEMP may find it nearly impossible to sustain its current market cap of over $61 million.
