Investors Rush Towards America Resources Exploration Inc (OTCBB:AREN)
After months and months of seeing virtually no trading yesterday the stock of America Resources Exploration Inc (OTCBB:AREN) simply exploded. In an unprecedented buying frenzy investors rushed towards the ticker and by the end of the session managed to exchange close 1.4 million shares. The buying pressure was so strong that it catapulted AREN up the chart and the stock closed the day with a gain of over 83% at $0.275 per share. The performance was undeniably positive but can the positive momentum be sustained?
Well, don’t get overly excited because AREN is surrounded by some rather serious red flags. The annual report that was filed a couple of weeks ago shows that as of March 31 the company had:
• $5971 cash and total assets!!!
• $6000 total liabilities
• ZERO revenues
• $29 thousand net loss
The picture is indeed quite grim but the company is taking some encouraging steps. Back in June AREN acquired a 515 oil field located in Atascosa and Frio County, Texas. The property has two working wells and a total of seven wells. On July 17 the balance sheet received a $150 thousand boost when the company sold 1 million shares at $0.15. The investor also has subscription rights to buy another 750 thousand shares at $0.15 and 800 thousand shares at $0.25. Even if AREN raises the entire sum of $500 thousand it won’t be nearly enough to justify the current market cap of more than $35.5 million though.
At the same time investors must take into account the millions of underpriced free trading shares that could find their way to the open market and collapse the price of the stock. During its last fiscal year AREN sold 2,360,000 shares for $23,519 in proceeds. The 15-for-1 forward split performed this April, however, turned those shares into 35.4 million shares with a split-adjusted price of less than $0.0007.
At least, you might think, AREN’s corporate headquarters look respectable enough. Unfortunately having in mind the atrocious financials of the company it seems more than likely that they have a virtual office in the building.
AREN is an extremely risky stock. Any trades involving the ticker must be preceded by extensive due diligence and careful planning. The company also has all of the typical signs found in pumped stocks – stock split, recent name and ticker change, millions of cheap free trading shares, so a promotion in the future won’t be that surprising.
