NuGene International Inc (OTCBB:NUGN) Bounces
NuGene International Inc (OTCBB:NUGN) is definitely in a better position than most of the other pennystock ventures. The company has respectable cash reserves of $619 thousand, manageable liabilities of $300 thousand and during the first quarter of the year generated close to half a million in revenues. Although they are not a profitable entity the net loss for the period of $240 thousand wasn’t that discouraging.
The company has also published several positive PRs announcing the results of two independent studies of their products while on June 11 it was announced that a study allowing NuGene to evaluate a medication formulation as an improved method of treating burn wounds will be initiated. Despite all the positive aspects of the company do you think that it is realistic of their stock to register 47 sessions of gains without a single red close?
Such an overwhelming climb up the chart was only possible thanks to a paid pump. Investors have been receiving hard mailer brochures in their mail boxes for weeks now. According to the disclaimers the sum of $2,280,000 has been provided as a production budget for the promotion. The paying party is Result Corporation, a third party shareholder of NUGN. The artificial hype pushed the stock to a high of $4.54 last Tuesday.
NUGN had been ignoring the unusual activity around their stock but last week they issued an official PR after a request from OTC Markets. The effect on the stock was simply devastating – on the very next day NUGN lost nearly 40% of their value dropping down to a close at $2.61. Many thought that this is only the beginning of the slide towards the bottom of the chart but not only was the stock able to avoid going lower it actually made an impressive recovery. On Friday NUGN bounced by 17%, jumped above $3 per share and closed at $3.20.
The stock may have avoided further corrections but the risks remain significant. The market cap of the company currently sits at over $126 million and without the paid pump such valuation simply cannot be supported. It is of vital importance to also keep in mind that the 148 thousand shares NUGN issued in March 2014 turned into more than 11 million shares as a result of the two forward splits. These shares have a split-adjusted price of just $0.0033 and the impact of such underpriced shares being unleashed on the open market could be disastrous.
