Microelectronics Technology Co. (OTCMKTS:MELY) Explodes On News
The stock of Microelectronics Technology Co. (OTCMKTS:MELY) has been sliding down the charts in the recent years and had reached triple zero land in the past month, after some promising spikes in price from the end of January.
While the press release from February 18 that announced that the company has entered into negotiations to acquire a cyber currency digital mining business didn’t make a splash, yesterday’s news of finalising the talks managed to boost the stock’s price.
The press release, that was posted in the afternoon, produced a lot of investor attention immediately and by the end of the day the ticker broke out of the triple zeros and closed the session with a 262% gain at $0.0029 on a $1.1 million dollar volume.
Still, the final documentation is expected to be completed by April 18, 2014 and the terms of the agreement aren’t mentioned anywhere, which leads to some doubts about the impact it will make on shareholder value.
This doubt is especially strenghtened by the company’s financial report for Q4 of 2013, which contained the following numbers of prime interest.
- cash: $3,672
- current assets: $4,406
- current liabilities: $649 thousand
- quarterly revenues: $4,521
- net loss: $154 thousand
Now, considering that the company is offering dedicated servers whose prices range from $138/mo to $336/mo, it seems that MELY isn’t having a lot of success. If you calculate the average price of their servers and the quarterly revenue the company is producing it turns out that MELY has around 6 customers total.
Furthermore, the extremely low assets of the company simply can’t back up the current market cap of its stock, which stands above $700 thousand. What is even more bothersome is the fact that the MELY has 218 million issued and outstanding shares, while the authorized count goes up to 950 million, which leaves room to believe that there will be further issuance of stock for the announced acquisition, that will surely cause dilution.
There seems to be little other options considering the company’s cash on hand and current assets. This means that we might see some serious corrections when the terms of the agreement become public and is reason enough for you to do your due diligence and weigh out the risks.
