VelaTel Global Communications, Inc. (OTC:VELA) Returns as Bargain Purchase
The world is becoming more connected, and the communications business even more crowded. Yet small cap companies like VelaTel Global Communications, Inc. (OTC:VELA) take their chances with rapidly expanding 4G technology. Recently, the stock picked up a new upward trend, adding more than 60% to a price of 5 cents. VELA has been going up in the past week, almost doubling its single-penny price. 
VELA was mentioned by Club Penny Stocks in December in a campaign worth $20,000 and even advertised as a long-term bet. Since in the longer term the VELA ticker has fallen gradually from highs of $140 and reached the penny level after a 1 for 100 split last year, we are not sure if the 4G business will ensure a constant upward stock movement beyond the limits of bargain seeking. 
The company offers to build and operate fast wireless networks worldwide, and for this it has the following financial resources to compete with giants and smaller contenders:
- $280,032 cash
- $5.53 million current assets
- $26.38 million total current liabilities
- $1.023 million revenues
- $4.028 million net loss
As we can easily see, the company is pressured by debt and although it has significant equipment and other assets that are larger than its $4 million market cap, it is still uncertain if VELA can secure enough revenues to ensure a long life.
VELA is also worrying with a long list of insider transactions, with several high administrators acquiring shares outside the open market for below-market prices and selling at higher positions from the previous months. We wrote previously that the company issued share purchase warrants for more than 4 million shares at 2 cents per share, and the record shows that since the issuance in November there were four insider sales registered, though for a lesser amount of shares. We still cannot know when the holders of undepriced warrants may decide to sell again.
Club Penny Stocks is among the most active pumpers for VELA, but it has a long history of picking other stocks, inflating their price with mass hype and leaving them to crash or linger. Todays Alternative Energy, Inc. (OTC:TAEC) is a prime example of a promising business model inflated by a paid pump. The stock went up significantly on high volumes on the most active day of the pump, but then lost most of its value as it slid back into double-zero price. Before taking up stocks that stand for a new and underdeveloped business, it is best to estimate how much risk and losses you could absorb.
