Rich Pharmaceuticals Inc (OTCBB:RCHA) is About as Risky as it Gets
Rich Pharmaceuticals Inc (OTCBB:RCHA) registered a wild session yesterday. It managed to shift more than $960 thousand worth of shares and put on a performance that is erratic at best. The ticker opened the day with a gap up at $0.30 per share, plummeted to just $0.25, then ran to an intraday high of more than $0.45. It eventually settled down a bit and finished the session at $0.305 (53% above Friday’s close).
That’s a lot of movement for a stock that has been virtually dead for the last couple of months, but, perhaps more surprisingly, it doesn’t seem to be caused by anything immediately obvious. The latest press release hit the wire three weeks ago, there have been no new filings for more than a month, and, according to our database, there’s no promotion currently running for the ticker. Or is there?
A quick look at the message boards and social media reveals that there are quite a lot of people complaining about unsolicited messages hitting their inboxes. Apparently, the SPAM emails are touting RCHA as “the opportunity of the year” that could go past “2 or 3 dollars“.
We all know that investing in stocks promoted through unsolicited emails is never a good call and the regulatory organs have issued numerous warnings about such pumps. The OTC Markets have apparently noticed the unusual activity around the ticker and yesterday, the company profile was given a Buyer Beware sign. A potential action from the SEC won’t be too much of a surprise which makes RCHA one of the most risky penny stocks out there.
Even if you decide to ignore the pump, there are some other red flags you need to consider. The market cap, for instance, stands at well over $120 million and that’s way too much for an enterprise that has the following figures in its latest 10-Q:
- current assets: $17 thousand
- current liabilities: $213 thousand
- no revenue since inception
- quarterly net loss: $143 thousand
It’s pretty clear that, based on the figures above, RCHA is extremely overvalued at the moment, but is that such a bad thing?
It is for the retail investors. There might be some people, however, who can make respectable profits at the moment.
As you can read from the latest reports, RCHA went through some restructuring back in the summer of 2013. There was a change in the business plan and a new management team took the helm. The 10-Q covering the period ended June 30 came out about a month after the completion of the deal and it told us that back then, there were around 993 thousand common shares issued and outstanding. Ben Chang, RCHA‘s CEO, disclosed in a Form 3 that he had direct or indirect ownership of around 273 thousand common shares.
That leaves us with a question: “Who was in possession of the other 720 thousand shares?“.
The answer might just be contained in the S-1 filing published when RCHA (then known as Nepia Inc) was going public. As you can see from the document, the company sold exactly 720 thousand shares at $0.03 a piece. Put in the 416 for 1 split from October into the equation, and you’ll see that the seed shareholders could now be holding nearly 300 million shares of common stock, for which they paid just $21,600.
Will they decide to unleash their holdings on the open market and cash in? We’re about to find out.
