Windstream Technolog (OTCBB:WSTI) Crushed Under the Weight of the Pump

The $900 thousand promotional brochures for Windstream Technolog (OTCBB:WSTI) started flying around almost two weeks ago and at first, it looked like everything was going according to plan.

The huge trading volumes suggested that investors really do believe that WSTI have the answer to Tesla Motors Inc (NASDAQ:TSLA)’s prayers for cheap energy. At the same time, the stock needed just ten days to climb from $0.95 all the way to $2.07. The run was never going to last forever and apparently, some people decided to make sure that it ends on time.

A Seeking Alpha (SA) contributor who goes by the nickname Penny Stock Realist disclosed a short position in WSTI and published an article on Thursday with which he expressed his opinions on the company. He said that according to him, WSTI is a worthless stock that is the target of a paid promotion and claimed that it could drop by 75%. Many people expected to see a huge crash after Mr. Realist’s article, but surprisingly or not, the ticker managed to hang on.

While the SA coverage didn’t have much of an effect on the performance, it did result in a reaction from the management team. On Friday, they published an 8-K form with which they said that they have been made aware of the hard mailer pump and informed us that they have nothing to do with it. A crash was inevitable this time.

In six and a half hours, WSTI managed to wipe out a whopping 34% while shifting more than $5 million worth of shares. Yesterday, the slide continued. Investors traded nearly 2 million shares while the stock erased another 27% of its market cap which means that WSTI stands below the $1 per share mark for the first time since the beginning of the promotion.

So, can it recover, or will it continue going down?

The chart on the right belongs to Pingify International Inc (OTCMKTS:PGFY). PGFY‘s stock was also a target of a huge paid pump back in May and like WSTI, they too announced that investors should not trust the pumpers blindly. Despite this, things didn’t really turn out well for them. About a week after the denouncement of the promotion, the ticker got suspended and it’s now traded on the Gray Market.

PGFY‘s faith could be enough to put off a lot of investors who are considering WSTI at the moment, but it should be noted that others might perceive Friday’s 8-K as a good thing. They might accept it as proof of the company’s willingness to be as transparent and as honest as possible and the fresh financing that was announced earlier today could act as an additional enticement for them to jump in.

If you are one of those people, we would suggest that you have a good look at WSTI‘s SEC filings. If you do, you’ll see that during the first quarter of 2014, they issued a lot of shares as a conversion of debt at $0.25 a piece. If you dig a bit further, you’ll note that back in 2008 they sold 15 million shares for just $10 thousand (or $0.0006 per share).

If you still think that this is not really that much of a problem, you might also want to bear in mind that the same people who are now saying that they have nothing to do with the pump put this picture on Page 20 of their latest 10-K. The aforementioned picture, as an eagle-eyed investor has spotted, looks like a photoshopped version of another picture which was uploaded on a website dedicated to an old man who likes to take long walks.

Is this a red flag? Or is it just a tiny detail that means nothing? We’ll leave it up to you to decide.