Root9b Technologies Inc (OTCMKTS:RTNB) is as Risky as Ever

Root9b Technologies Inc (OTCMKTS:RTNB) is sinking fast and investors are in a hurry to abandon ship. On July 2, Joseph Grano, the company CEO, appeared on Fox Business where he talked about NYSE’s technical problem and the possibility of it being caused by a cyber attack, but even that wasn’t enough to cushion or stop the fall. Thanks to the heavy selling, RTNB lost another 16% yesterday and it stopped at $0.90 per share – exactly 64% below the 52-week high booked in mid-May. So, why is the performance so appalling?

It all started about a month ago when a person that goes by the nickname of The Pump Stopper disclosed a short position in RTNB, wrote an article on a popular financial website, and expressed his negative views on the company’s business and its future. This is not the first penny stock that becomes the victim of such articles. Short sellers frequently use the aforementioned website to publicly express their negative opinions on various OTC enterprises and they are often successful in pushing the targeted tickers down.

In RTNB‘s case, however, things turned out to be a bit more dramatic. First, the company issued a response to The Pump Stopper and said that his claims are “baseless”. Other people expressed a different opinion. Several law firms started their investigations later on and by the looks of things, a class action lawsuit is being prepared against RTNB which will allege the company and its management team of, among other things, making “materially false and misleading statements”.

There are still people who believe that the legal actions will come to nothing and they do still seem convinced that the company is in a healthy shape. And indeed, according to the latest 10-Q, RTNB logged more than $9 million in revenues in a matter of just three months. That’s not to be sniffed at.

So, on the one hand, the company is presenting itself as a working OTC entity that is about to make a name for itself in the booming cyber security industry. On the other, some people are saying that this is just a big fat lie.

Even if you do believe that RTNB really is onto something, you should be careful not to get overly optimistic. The stock has already lost quite a lot of ground and while a bounce is not out of the question, further drops are possible as well. Especially with the looming legal actions.