Propanc Health Group Corp (OTCMKTS:PPCH) Tries to Resurface Again
At the beginning of March, Propanc Health Group Corp (OTCMKTS:PPCH) was traded deep in the double-zero territory. When we say ‘traded’, the volumes were all but non-existent and it looked like the number of people interested in the company was extremely small. Right now, the same exact stock is hovering just below the $0.04 mark and yesterday, it generated a dollar volume of about $320 thousand. The ride offered by PPCH, however, has been anything but smooth.
The ticker first broke out in mid-March and just a few weeks later, it found itself playing with the $0.09 per share mark. Sadly, it then crashed heavily and not that long ago, it was barely keeping its head above $0.03. As you can see, it has managed to recover some of the lost ground, but the volumes we’ve been witnessing over the last few days are not as big as they used to be which goes to show that the inconsistent behavior is deterring some investors away.
But why is PPCH so reluctant to make a more significant move towards the higher end of the charts?
At first glance, the press releases sound quite optimistic. There’s no shortage of people who believe in the science behind PPCH‘s business plan, and the fact that even the New York Times is interested shows that there might be something to the company’s cancer treatment ideas. Unfortunately, researching penny stocks requires a lot more than just reading the newspaper. If you want to invest in an OTC company, you need to know what its financial situation is, and that’s where things start to take a turn for the worse in PPCH‘s case.
The latest 10-Q covers the period ended December 31, 2014 and it looks like this:
- cash: $14,588
- total assets: $52,940
- current liabilities: $1,930,189
- NO revenue since inception
- quarterly net loss: $242,159
These are not the sort of figures you’d expect from a company that is at the forefront of the battle against one of the most formidable diseases the world has ever seen. It must be said, however, that so far, PPCH has been able to fund its operations. Sadly, that’s where another problem pops up.
Over the years, the company has entered into several convertible note agreements and although this gave it the money it needed to continue working, it also resulted in some significant dilution. As we mentioned in our previous articles, the number of issued and outstanding shares grew from just over 82 million on October 14, 2014, all the way to more than 190 million on February 16, 2015.
Perhaps more worryingly, a significant portion of the newly printed stock saw the light of day at a discount to the market price. The events from December 26, 2014 will give you a perfect example. Back then, retail investors were buying and selling PPCH shares at a rate of $0.0024 apiece. On the same exact day, some note holders converted $4,044 worth of debt into 5,655,958 shares which brings the conversion rate down to just $0.0007 per share – 70% less than what people like you were paying for the stock.
The management team apparently noticed the problem. On April 16, they said that they will be working hard towards repaying the convertible debt with cash and that they’ll do everything they can to keep the dilution on a leash from now on.
As always, the press release sounds nice enough, but it’s also peculiarly-timed because just three days before it, PPCH published a rather lengthy 8-K form telling us that between January and March, they have picked up hundreds of thousands of dollars worth of toxic debt which can be turned into stock at discounts ranging from 25% to 55%.
