The Excitement Around BlueFire Renewables, Inc. (OTCMKTS:BFRE) Continues
It is safe to say that the company BlueFire Renewables, Inc. (OTCMKTS:BFRE) has been in a tough spot for quite a while. They have been trying to find the necessary funds for their bio-energy project in Fulton, Mississippi for years but without much success. Back in December 2013 the Department of Energy informed the company that they will no longer provide funding for the progress of the project due to the company’s inability to meet certain deadlines.
Things were indeed looking grim and the performance of the stock was equally as depressing. The fact that for more than a year there were no PR statements issued by the company didn’t help either. Right before the start of 2014 BFRE registered its 52-week low of $0.0009 while just a few weeks ago, on October 7, they dropped down to their lowest point for the last eight months of $0.0018. On the very next day everything changed though.
Half an hour before the start of the session BFRE announced that they have signed a Master Engineering, Procurement and Construction (EPC) contract with a subsidiary of China Three Gorges Corporations, China’s biggest renewable energy company. The news propelled BlueFire up the chart and they broke through the 1 cent per share mark with ease. Last Thursday investors were hit with another major announcement – BFRE received a Letter of Intent from the Export Import Bank of China for up to $270 million in debt financing. This development was so huge that even Bloomberg felt compelled to cover it.
The renewed enthusiasm shown by investors caused the stock of the company to jump up by 307% on the day of the announcement reaching $0.042 per share. On Friday the gains were smaller but still an increase of 78% and a close at $0.075 is equally as impressive. The last time the ticker traded at such prices was way back in April, 2013.
Before you commit to any trades though there are some things that must be considered. First of all, the financials of the company are quite worrisome. At the end of June 30 they reported having:
• $41 thousand cash
• $241 thousand total current assets
• $1.8 million total current liabilities
• $452 thousand revenues
• $87 thousand net income
The financing offered by the Export Import bank of China although massive won’t be enough to cover the entire cost of the Fulton project. BFRE will have to find another $30 million, amount that is still quite big. Not to mention that according to the CEO the debt financing is expected to close during the first half of next year.
Meanwhile shareholders of the company have had to endure alarming levels of dilution. Since the start of 2013 and through June 30, this year, the notorious toxic funder Asher Enterprises, Inc. has received around 40 million shares as a conversion of notes. Subsequent to June 30 they were issued another 24 million shares. All of the convertible notes featured a major discount to the market price at the time of the conversion. Back in April BFRE finalized a $350 thousand promissory note with AKR Inc. As part of the deal AKR are entitled to receive a total of 23,1 million warrants that have an exercise price of just $0.007.
The sums featured in the latest announcement are big enough to keep the excitement around the company going for a while but there is still quite a lot of time before the financing is officially closed. In the meantime the millions of extremely cheap shares, if dumped on the market, could drive the price back down. That is why it is paramount to weigh all the possible risks before you put your money on the line.
