Tranzbyte Corp. (OTCMKTS:ERBB) Subsides After Spike
Yesterday Tranzbyte Corp. (OTCMKTS:ERBB) remained heavily traded, with over 50 million shares changing hands. The enthusiastic PR-driven surge that took place on Monday deflated quickly and ERBB ended the session 10% in the red.
The underwhelming market performance of the stock could serve as yet another reminder that PR hype lasts only so long. Over the past month the share price moved up pretty much exclusively on optimistic PR, starting with the announcement of May 21 concerning the livestream from multiple states showing multiple ZaZZZ machines that never happened.
We would like to pay special attention to the share structure and debt situation of ERBB. There seem to be a large number of people on discussion boards who repeat an endless mantra – how ERBB is not diluted and is not diluting, dismissing the company’s convertible debentures, their clearing, new accumulation and conversion prices.
Going back over the stretch of one calendar year, between March 2013 and March 2014, the company issued a total of 1,901,531,786 common shares. This is about 50% of the 3.84 billion outstanding shares as of this March, which means ERBB diluted by 100% over the course of one calendar year. It’s true that the share price of the company is now also a lot higher than it used to be back in March 2013, but this is not due to a massive increase in revenues or ERBB turning profit. Rather the price surged on the ecstasy of the 2014 marijuana rush and optimistic PR that hasn’t yet culminated in any definitive agreements.
What makes matters worse is that the majority of those 1.9 billion shares were issued at an average of $0.0005 per share – a 98% discount from current prices. COO and president Stephen Shearin is doing his best to assure everyone that dilution is a thing of the past, when ERBB was trading at a fraction of a cent, and the toxic financing has long since come to an end. Yet, the company issued new convertible debentures in Q1 of 2014 for a total of $384 thousand, both of them converting at a 50% discount from the lowest closing bid price 18 months prior to conversion. This means that this newly accumulated debt could potentially convert in another 760 million shares, at $0.0005 per share once again. The $384 thousand was debt that originated in Q1 alone. As of March 31, 2014 the company had an additional $870 thousand in outstanding principal amounts and interest on convertible debentures issued in the past. This is not some hidden knowledge, all of this information is contained in the last few pages of the company’s latest quarterly report and is available to everyone.
The company’s fiscal year ends in June so it will be another 90 days before traders can get hard information on what happened with debt, debentures and outstanding shares over Q2. Meanwhile, pretending that ERBB is swimming in clouds of candy floss is not doing investors any favors. If the company’s endeavor with their ZaZZZ vending machine pans out in a particularly favorable manner, ERBB may yet get its shot at glory. Whether this happens remains to be seen.
