Windpower Innovation (OTCMKTS:WPNV) Set Sails North

Our last article on Windpower Innovation (OTCMKTS:WPNV) came out way back in March 2011 and back then we reviewed WPNV because there was quite a big promotion running for them. We estimated that the total budget amounted to $80 thousand, but the results were somewhat off the mark. The ticker did gain some ground when the hype was on, but soon after it crashed hard making quite a lot of investors lose their money.

Yesterday we received some emails minutes after the market opened, but this time, Insane Stocks claim that they have received absolutely no compensation for their coverage and that makes us wonder: “Have they done the advertisement for free because they want to show us that they can predict the upward movement of a company that really has something to show, or do they have some other things in mind?”. Whatever the motives for the awareness campaign, WPNV did gain as much as 83% in value yesterday. As is often the case, though, it wasn’t only the emails that pushed the price up.

There were also a couple of press releases that probably got investors mightily excited, and if we have to be honest without them, the ticker would have probably been abandoned by most traders because WPNV‘s financial situation according to the latest quarterly report is quite dismal. Here are the figures as of March 31:

• cash: $0
• total assets: $1,000
• current liabilities: $650 thousand
• quarterly revenue: $1,000
• quarterly net loss: $107 thousand

This is where the first press release comes in. Back on April 25 WPNV announced that they have managed to take a look through the papers of their newest subsidiary, RIG Constructions, Inc. and, naturally, they are happy to announce that they look good. The yearly and quarterly revenues quoted in the press release are in their millions and they also say that there has been an increase in the proceeds which means that business is booming. Unfortunately, they also say that they didn’t have the time to include the financials in the quarterly report which means that we just have to trust them that things really are as good as they sound. They also say that they are working on decreasing the debt as well as the operating expenses but, apparently, they don’t deem it necessary to work with figures in this particular field, at least not in the press release. Consequently, we only see the gross revenue numbers which, in turn raises some questions around the profitability of the daughter company.

Nevertheless, about a month after they disclosed some of RIG Constructions’ financials, they issued another press release in which they said that they have also been working on their primary business – wind turbines. On May 21 they said that they have successfully tested their next generation turbine and it seems to be yielding some impressive results. How did they manage to secure the funds for the testing procedures remains unknown.

On the whole the more research you do, the more question pop up. Take their corporate headquarters, for example. It’s situated in a nice office building in Phoenix, Arizona and the rent is probably quite high. In their financial statement, however, we read that it has been provided by their IR firm – Belmont Acquisitions – for free. Look it up on the Internet and you will find that it is also offered as a virtual office. Probably that’s why another publicly traded company, Liberty Gold Corp (OTCBB:LBGO) (who have been pumped numerous times in the past) provide the same address for their headquarters.

You might accuse us of being too skeptical about the whole thing, but the truth is, we have seen far too many companies fail under the promotional pressure, even when the advertisement is done for free. Take Global Entertainment Holdings, Inc. (OTCMKTS:GBHL), for example. Insane Stocks started sending alerts for them on May 9 and, just like the campaign for WPNV, they disclosed no compensation. You can see from the chart on the right that GBHL‘s performance since then is not the definition of “rock solid”.

While the press releases do sound optimistic, there are also some doubts as to the performance of the newly acquired subsidiaries. One thing the shareholders must hope for is that the merger doesn’t end up the same way the last one did. WPNV acquired a company called Geartec Services, Inc back in September 2009 but, apparently, by February 2010, they had changed their mind and the agreement was terminated. Just something to bear in mind while you are considering your investment options.