Is this deja vu all over again in Mamma.com (MAMA)? Two years ago, MAMA stock went soaring over a period of a month, only to crash and burn. Class actions were filed that tied mamma.com to notorious stock promoter Irving Kott.
Just last month (November 16, 2006), the company settled this class action lawsuit for several millions of dollars. And now, deja vu. Since the most recent announcement of the adding of a video search component (only in beta format based on text tags like everyone else) the stock of mamma.com has risen over 300% on investor euphoria.
MAMA 1-yr chart
With a market cap of $100 million, Mamma.com has a net cash position of around $5 million, hardly enough to compete in the search space, and has recorded three month revenues of last quarter of a paltry $1.8 million, down 20% from the same three months a year ago. The company has lost $4.7 for the last nine months and shows no signs of recovery.
Last time this happened, the SEC started an informal inquiry into their trading. Traders must beware of the dangers facing shareholders.
MAMA is a notorious PIPE issuer and will likely use the recent rise in stock price to raise money. When the stock market starts looking like a casino for daytraders and momentum players, it is normally time to take chips off the table.
Cautious investing to all.
Disclosure: Author is short MAMA.