SeeThruEquity Initiate Coverage On Propanc Health Group Corp (OTCMKTS:PPCH), Stock Surges
Yesterday the equity research and corporate access firm SeeThruEquity published a PR announcing that they have initiated coverage on the stock of Propanc Health Group Corp (OTCMKTS:PPCH). SeeThruEquity gave the ticker a 12-month price target of $1.52.
The effect that this announcement had on the performance of the stock was enormous. PPCH opened the session at $0.0445 and even slipped into the red but when the PR hit the web investors rushed towards the stock in a state of buying frenzy. By the time the closing bell rang over 71 million shares had changed hands bringing the dollar value for the day to $5.15 million placing Propanc among the most traded pennystocks on the whole market. The buying pressure pushed the ticker to a close at $0.084 for a gain of nearly 89%.
While SeeThruEquity disclose that they have not been compensated for the report investors should still keep in mind that they are dealing with a pennystock company. This means that the risks involved in trading the stock are inherently extremely serious and doing your own due diligence is always the best course of action.
Let’s start with the quarterly report covering the first three months of 2015 that was filed less than two weeks ago. According to it PPCH finished the quarter with:
• $168 thousand cash
• $308 thousand total current assets
• $2.1 million total current liabilities
• ZERO revenues
• $454 thousand net loss
The balance sheet clearly shows that PPCH are in a dire financial state. The company has limited cash reserves, working capital deficit of $1.8 million and an accumulated deficit of $19 million.
The picture around Propanc gets even bleaker when you add the crushing dilution of the common stock into the mix. The outstanding shares of the company grew from 90 million as of November 19, 2014, to over 330 million as of May 15, 2015, an increase of over 266%. The majority of the shares issued during that period came into existence through the conversion of notes at severely discounted prices – nearly 30 million shares were issued at $0.0006 or $0.0007 while over 125 million shares had prices ranging between $0.0011 and $0.0020. At the end of March the company had $1.1 million in convertible notes.
In quite a few of the PRs published by PPCH the management team has stated that they are committed to minimizing shareholder dilution and indeed on May 7 two notes totaling $100 thousand that were due for conversion in the next 90 days were prepaid. It seems rather strange then that according to the disclaimer at the bottom of this PR the same people have decided to pay $5000 a month and issue a $60 thousand convertible note to the parent company of the Wealthy Biotech Trader for marketing and advertising services.
The millions of discounted shares, the lackluster financials and the fact that PPCH still face years of clinical research and trials, which is a notoriously lengthy and capital-intensive process, are risks that should not be underestimated. Any position in the company should be preceded by careful planning.
