Primco Management Inc (OTCBB:PMCM) Losing Ground Once Again

On Monday Primco Management Inc (OTCBB:PMCM) showed us that they’re capable of some breathtaking runs in the green direction when the ticker gained as much as 50% and shifted a record-breaking 297 million shares in just a day. Yesterday’s performance however, was less than impressive. PMCM opened the session at $0.0059, it did manage to reach an intraday high of $0.006 but apart from that, it was pretty much sliding down throughout the day. At 126 million shares, the trading volume wasn’t as huge as the one from Monday, but it still amounts to more than twice the three-month average which means that a lot of people are now wondering if yesterday’s correction was just a hiccup or if it is a sign of something far worse to come. We decided to see if we will be able to give these people an answer.

As we mentioned yesterday, when the new CEO, Mr. David Michery took the helm of PMCM, he said that he intents to turn his new company into a multi-million dollar corporation listed on NASDAQ. There are numerous factors that make this statement seem rather far-fetched and that’s why we’re going to take a more down-to-earth approach and instead of dreaming about NASDAQ, we’re going to estimate PMCM‘s chances of survival on the OTC Bulletin Board. By “survival” we mean having an operating company with some support shown from the shareholders and a management team that potential investors can really trust. In order for that to happen, PMCM will need to have some sort of financial stability, but do they?

Well, according to the latest financial statement, they don’t. Indeed the working capital deficit is not huge, but the rest of the figures look pretty gloomy. Here’s a summary of the most important financials as found in the 10-Q covering the first three months of 2013:

• cash: $148
• current assets: $1 million
• current liabilities: $1.1 million
• no revenue
• quarterly net loss: $82 thousand

It’s not all bad news, though. The assets comprise mainly of contracts signed with artists which is supposed to be PMCM‘s main source of revenues. In addition to this, on May 30 they announced that they have completed the acquisition of an entity called Top Sail Production which is supposed to bring in some new Hip-Hop stars into the equation. A couple of weeks later a letter of intent was announced for yet another merger and if it gets completed, growth should be guaranteed. So, with all that in mind, you’re probably wondering why the stock performance has been so catastrophically dreadful over the past six months.

Well, in many ways the chart for PMCM resembles the one of Cereplast Inc (OTCMKTS:CERP). The two companies are in completely different business sectors and unlike PMCM, CERP aren’t dreaming of turning into a NASDAQ company. They were actually there until not that long ago. Unfortunately, they experienced some financial trouble which meant that they needed to borrow some money and they turned to a couple of entities called Magna Group and Hanover Holdings. These two hedge funds are known toxic financing providers throughout Pennyland and their names are present in the filings of many small cap ventures. CERP apparently realized that they have made a mistake by borrowing money from these people and they recently announced that they’re going to file some legal complaints against them because, according to the management team, Magna and Hanover are the ones to blame for CERP‘s 92% price drop during the period between October 2012 and April 2013.

Magna Group are present in PMCM‘s filings as well and according to a SC 13G published about a month ago, they held around 25 million shares. Yet, a couple of days ago, PMCM announced that they have settled all the debt owed to Magna and this, on the one hand is a good thing, since the next report will have much less in terms of liabilities. On the other however, the notes were repaid through the issuance of shares which means that Magna still have some positions at PMCM and if they decide to sell them, the ticker could be in for another crash.

The promotional pressure around PMCM is also a cause for concern and as we mentioned yesterday, around ninety emails have hit our inbox ever since active trading started around the first half of February. The combined result is absolutely devastating – 97% of the value is lost. That’s why considering all the risks carefully is absolutely crucial before making any investment decisions.