SK3 Group Inc (OTCMKTS:SKTO)’s Performance Remains Disappointing

Here’s something you don’t see every day – a penny stock whose market cap outweighs the total assets. What’s more, SK3 Group Inc (OTCMKTS:SKTO)’s net income for the latest reported period ($13.2 million for the quarter ended June 30) is more than twice as big as the market capitalization (around $5.8 million at Friday’s close). We know what you’re thinking right now: “This is an extremely undervalued stock that should immediately find a place in my portfolio.”. Before you get too excited, however, we reckon that some questions are in order.

Like, for example, the question of who (or what) is causing the terrible stock performance from the last eight months.

As you can see from the chart, SKTO skyrocketed back in March when the announcement of the company’s entrance into the much talked about medical marijuana business propelled the price out of the triple-zero territory and pushed it as high as $0.08 per share. Unfortunately, since then, it’s all been pretty much downhill. Even the few positive sessions registered last month failed to put a smile on the faces of investors who bought in on SKTO while the hype was at its peak. Which is probably why the ticker’s on the decline once again.

The pumpers certainly played their role in June and July when a couple of paid campaigns did little but to accelerate the fall. Right now, there seems to be no immediately obvious effort to promote the stock, but, if this isn’t pushing the price down, then what is it?

Well, it might be some disappointed shareholders who have not only had to deal with the horrific fall, but also have to swallow some unkept promises from the management team. On October 11, for example, SKTO issued a press release in which they said that they are going to publish their Q3 results “by month’s end“. That, along with a few other optimistic announcements, pushed the price back above the $0.01 mark, but, as soon as investors saw that the deadline is about to be missed, some selling ensued which resulted in a rather disappointing performance during the last four sessions (culminating in Friday’s losses of around 27%).

“Still” – you’re thinking – “they did announce the preliminary results on Friday and, as long as the figures are correct, the price should go back up again.

That’s true, but being a bit cautious is always a good call when considering a potential investment in a penny stock and, especially so, when the penny stock in question has so many red flags around it.

Let’s start with the most basic of things – the company headquarters. According to SKTO, it’s situated in a rather good-looking office building in Miami, Florida. So far, so good, but when you dig a bit further, you’ll see that the same exact address (down to the number of suite occupied) is used by not one, not two, but three other penny stocks – Home Health International Inc (OTCMKTS:HHII), Amalgamated Gold and Silver Inc (OTCMKTS:BCHS) and Youngevity International Inc (OTCMKTS:YGYI). Not surprisingly, the office is offered as a virtual solution and we reckon that this fact does little to boost the credibility of a company that claims to be making as much as $13 million per quarter.

When you dig a bit further into SKTO‘s old press releases, you’ll find some more eyebrow-raising discrepancies. Back in June, for example, they announced the acquisition of BBORL, Inc – a company that has been trying to develop and produce non-psychoactive cannabinoid medicines since 2011 (according to the PR). When you do a quick search on California Secretary of State’s website, however, you’ll see that SKTO‘s daughter company was registered on May 14, 2013, just 47 days before the closing of the acquisition and if you take the time to check out the address of BBORL’s principal office, you’ll see that it doesn’t really look like a state-of-the-art laboratory where a cure for cancer is about to be discovered. Make sure you do a lot of due diligence and tread very carefully when considering your options.