Just when it seemed sanity was returning to Medbox (MDBX.PK). A month ago the shares had risen 3,000% for no fundamental reason whatsoever and its rise was merely due to a brief mention in an article in the Marketwatch section of the Wall Street Journal, reminiscent of irrational euphoria of the 1990s dot com era. Literally over night, MDBX.PK became a multi-billion dollar market cap company trading at over $200 per share for no rational reason. The next morning, MDBX.PK warned in a press release:
"While we are pleased by the share attention, Medbox shares have traded between $2.75 and $3.45 over the past several months. Our fundamentals and market potential are improving, especially with the potential of our new Rx product line, but we temper investor expectations at present price points."
MDBX.PK shares came crashing back to Earth, opening down over 50% and closing down over 90% that day. Other than the dead cat bounce that followed probably from day traders playing with it amid its newfound attention, MDBX.PK continued to drift and slowly fade into the background now that its 15 minutes of fame were over
Then, it happened again -- MDBX.PK got a very brief mention on CNBC for just a few seconds, and very little of anything mentioned about MDBX.PK specifically other than its previous 3000% price rise and fall. Shares shot up anyway nearly $9 per share in just a few minutes rising from around 50% from just under $23 to $34 per share. After getting another very quick mention by CNBC mocking its market value saying "take that Facebook (FBN)!" It closed right around $30, up 32% on the day.
Here's what's really odd: MDBX.PK had a press release 3 hours before the CNBC show that had bad news, yet shareholders apparently didn't even blink. The release stated in part "Utilizing its strong stock price, which has recently settled into the $20 range and boasting a market capitalization of over $245 million, the company is actively pursuing select strategic acquisitions..." and "To avoid dilution to shareholders, the company's executives, founders, and affiliates, who possess over 90% of the company's stock will be contributing up to 2,000,000 shares of Medbox stock, valued at approximately $45,000,000, back to the company to support acquisition activity."
Sounds like good news, right? Wrong! Read between the lines! The company is all but saying "Our stock is vastly overvalued so what better way to take advantage of this fact and use it to acquire other companies that will add fundamental value to our business since there's no way these ridiculous prices are going to hold long term. In fact, we're so confident that they won't hold and us insiders can't even sell at these levels that we're willing to gift $45 million worth for nothing." At least that's my take on it.
Nobody gives away $45 million for the heck of it. Nobody. Management basically is saying, by implication, that MDBX.PK is heading for another nosedive. Which shouldn't come as a surprise. The non-SEC-reporting company filed something resembling a 10Q with otcmarkets.com revealing barely over $1.3 million in sales last quarter and a net income of $78,584.26. That's not a typo. The market cap is over $300 million with a net income of 78 and a half grand for the quarter or for all intents and purposes -- zero.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.