Wave Systems Corp. (NASDAQ:WAVX) Could Soon Break Down the Trading Channel

[[tagnumber 0]]Wave Systems Corp. (NASDAQ:WAVX) made an attempt to reach the upper band of its trading range yesterday, though a bearish pattern appeared on the chart after that attempt failed. The company will very soon issue over $13 million new shares to settle a short–term debt while earlier this month its public accounting firm announced its resignation.[[tagnumber 1]] [[tagnumber 2]][[tagnumber 3]][[tagnumber 1]] [[tagnumber 2]]After gapping up at market open, WAVX closed at $0.17 for a share which is a 6.19% gain from the previous close but lower that the opening level. The chart looks bearish after such a session and the declining trading volumes also confirm that the stock is more likely to drop back to the low end of its trading channel. In fact, it could easily drop even lower in the coming weeks.[[tagnumber 1]] [[tagnumber 2]]The company reported consistent decline in sales this year while at the same time the net loss was a few times higher in the second quarter compared to the same period of last year. Even worse is WAVX liquidity – it has a had lastly a working capital gap of over $5 million. In addition comes the negative equity that also makes WAVX an unattractive investment even at the current market value of the stock.[[tagnumber 1]] [[tagnumber 2]][[tagnumber 10]][[tagnumber 1]] [[tagnumber 2]]In September, KMPG LLP announced its resignation as WAVX public accounting company, a move that should immediately send a strong warning signal to investors. Only five days before that, WAVX had entered into a Convertible Bridge Instrument and Warrant Subscription Agreements with certain investors.[[tagnumber 1]] [[tagnumber 2]]The agreements consisted of $490,000 in bridge financing and warrants to purchase up to 1.125 million shares of WAVX common stock at an exercise price of $0.18. The repayment amount was set at $588,000 and was supposed to be repaid by December 24, 2015, otherwise it could also be converted into shares of common stock.[[tagnumber 1]] [[tagnumber 2]]On Monday this week, it became clear that WAVX does not intend to repay that short–term loan. It filed a registration statement covering the sale of all the shares issuable upon conversion of the debt and exercise of the warrants – a total number of over $13 million shares with an estimated price of $0.15 per share. As the company had around 60 million issued and outstanding shares at the end of June, the new shares will cause significant dilution and possibly bring the value of the stock much lower.[[tagnumber 1]] [[tagnumber 0]] [[tagnumber 1]]