WebXU Inc (OTCMKTS:WBXU) Skyrockets After a Partnership Announcement

WebXU Inc (OTCMKTS:WBXU)’s latest financial report covers the year ended December 2012 and it shows that thirteen and a half months ago, they had just $15 thousand in cash, around $4.2 million in working capital deficit, no yearly revenues, and a net loss for 2012 of nearly $18 million.

Despite the fact that WBXU weren’t particularly fond of filing their reports on time, they received quite a lot of promotional coverage during 2013. Even Tobin Smith wrote a research report on the ticker in March and claimed that it could reach $2.50 per share. Eleven months later, at the beginning of February 2014, WBXU was hovering around $0.01. Last week, Penny Stock Professor and Club Penny Stocks came back with a couple of email alerts and helped the ticker drop below the penny per share mark.

Even when you check out the address of their company headquarters, you’ll see that it’s actually a rented mailbox.

As you can see, there’s no shortage of things that could scare away the more risk-averse investor and yet, yesterday, WBXU exploded. The daily volume amounts to more than 34 million shares while the trade value stands at around $1.14 million. The ticker ran from $0.0079 all the way up to $0.034 which, according to the company profile on the OTC Markets’ website, commands a market cap of around $2.4 million. If you take a look at the intraday chart, you’ll see that virtually all of the trading took place in the afternoon and this brings us on to a very interesting question: “How can WBXU make such a jump in a matter of just four hours?“.

The answer is quite simple – they issued a press release. But not just any press release. They announced that they will now be partnering with none other than Hemp, Inc. (OTCMKTS:HEMP). Apparently, WBXU will provide HEMP with various web development and advertising services and the PR suggests that both companies will benefit immensely from the deal.

Unless WBXU start filing their reports on time, however, we won’t know if this is indeed the case. In the meantime, we might as well take a look at the company’s previous partnerships and see what the results of them are.

Back in March 2013, they announced that they are going to provide Mimvi Inc (then traded under the MIMV symbol) with various services that were also supposed to help WBXU monetize on increased consumer traffic. The lack of current financial information means that we have no idea if they actually managed to do it. What we do know, however, is that Mimvi’s business isn’t exactly flourishing. They ended the third quarter of 2013 with around $1.3 million in working capital deficit and a net loss of around $2.1 million and later decided to change their name to Adaptive Medias Inc (OTCBB:ADTM). As you can see from the chart on the right, their stock performance has left a lot to be desired as well.

All in all, the announcement of the partnership with HEMP did cause quite a lot of stir on the market yesterday. There’s even a possibility of one or two more green sessions. Bear in mind, however, that the run is currently fueled by nothing more than hype and excitement and if WBXU fail to deliver on their promises, things could turn sour very quickly. Doing a lot of due diligence and carefully evaluating the potential risks is, as always, absolutely crucial.