Neutra Corp (OTCMKTS:NTRR) Driven by the Marijuana Craze
As you might have heard already, on January 1, the sales of recreational marijuana in the state of Colorado became legal and you might have also noticed the profound effects this action had on the OTC Markets. Since you are here, reading an article about Neutra Corp (OTCMKTS:NTRR), you probably know that it is one of the so called “pot stocks”. So how has it been doing over the last week or so?
Quite well, actually. The last red session was registered on December 30 and since then, the cumulative gains amount to no less than 207%. Yesterday’s trading was particularly intense.
A couple of hours before the opening bell, NTRR issued a press release with which they informed us that they are preparing a line of cutting-edge products to satisfy the booming cannabis market in Colorado. They refrained themselves from making predictions about revenue growth coming from the new products and they also failed to give us any deadlines on the start of the commercialization process, but apparently, traders weren’t too bothered about this. The session ended with around 47% in gains, an intraday high of $1 per share, and a dollar volume of $1.67 million.
It looks like NTRR is still capable of surging up with the help of an optimistic PR. But does it have what it takes to sustain the run?
The ticker’s historic performance suggests that the answer is negative. If you’ve seen some of our previous coverages, you probably know that the rate at which optimistic announcements come out of NTRR‘s headquarters is absolutely astonishing. And yet, the chart at the beginning of the article reveals that the stock performance leaves a lot to be desired. What’s the reason for this?
Well, there was a promotional campaign for the ticker back in November and it might have played its part, but there are other things pushing the price down.
Like, for example, the latest financial statement. During 2013, NTRR announced at least four joint ventures with companies that were supposed to kick-start the commercialization of a number of products and bring in a lot of fresh proceeds. Unfortunately, the quarterly report for the period ended October 31 shows that the partnerships resulted in nothing more than an almost empty bank statement. Here’s a summary of the most important figures in the 10-Q:
- total assets: $91 thousand in cash
- total liabilities: $213 thousand
- no revenue since inception
- net loss: $845 thousand
The dismal financial report isn’t the only thing pushing NTRR‘s price down.
If you compare the latest 10-Q to the one for the preceding period, you’ll see that they have burned through quite a lot of cash between July 31 and October 31, but you’ll also noticed that they have managed to reduce the liabilities significantly. They did it by converting the debt into common stock. A total of 3.8 million shares saw the light of day in just four and a half months but, perhaps more worryingly, the conversion price for all of them is $0.01 per share. To get an idea of how huge the discount is, you should probably bear in mind that the 52-week low registered by the ticker about a year ago hovers around $0.10.
This means that if the note holders decide to release their stock on the open market, they could make quite a lot of quick and easy money. If that happens, the ticker will take a serious beating which is why, despite all the hype and optimism spurring out of the PR articles, you should carefully consider all the risks and conduct the proper amount of due diligence before committing to an investment.
Another thing that you should probably know is that, unlike NTRR, the majority of marijuana stocks saw a significant pullback during yesterday’s session. Growlife Inc (OTCBB:PHOT), Hemp, Inc. (OTMKTS:HEMP) , Creative Edge Nutrition Inc (OTCMKTS:FITX) as well as a few other tickers finished the day in the red, but perhaps the biggest drop was experienced by GreenGro Technologies, Inc. (OTCMKTS:GRNH) who incinerated 52% of their value in just six and a half hours. The burning question now is: “Is this just a healthy consolidation, or is it a sign of something worse to come?”. The coming sessions should reveal the answer.
