Independence Energy Corp. (OTC: IDNG) has made a spectacular run over the past few months. Fueled by exciting news from the Company as well as a multi-million dollar stock promotion, IDNG has moved from a start point of around $0.50 to close to $4 per share. Just when we thought the stock could not go any higher; The Company has announced a 5 for 1 forward split of the stock!
Independence Energy is oil and gas exploration and development company focus on projects in the United States. The Company is currently seeking to further advance their existing projects through development of offset drilling and to expand its portfolio to include additional property interests in the USA.
To that end that Company has recently signed several joint venture agreements and acquired interest in several well programs in Texas. While this is certainly evidence that the company is moving in the right direction, does this justify a $100M market valuation?
Investors have always loved resource stocks such as oil and gas as well as gold exploration companies. These stocks can produce spectacular returns in a very short time frame especially if the target company makes an important discovery. However, too many of these so called home run plays collapse just as fast as they rise, spelling huge loses for investors. One of the primary reasons these stocks are so highly volatile is that much of the time the companies do not have the funds to execute their business plan. Many of these companies do have valuable resources in the ground however the cost of mining these resources is more than they are worth.
Back to Independence Energy Corp and its $90M market valuation. While the company certainly seems to have some exciting projects on the horizon, they have $0 revenues to date and minimal assets. In fact the company's biggest project by far seems to be the multi-million dollar stock promotion. While the promotion, coupled with the recent news of the 5 for 1 forward stock split could certainly drive the stock much higher in the short term, is this really the path towards building long term shareholder value? If history is any indication then multi-million dollar stock promotions built on hype and hot air are certainly not the right path at least for investors; these types of stocks tend to drop big once the promotion is over and trade for a fraction of the highs they reached at the peak of the hype.
Some may look at my statement that "the company's biggest project by far seems to be the multi-million dollar stock promotion" as a little bit presumptuous so let's look a little deeper;
On one side we have the stock (OTC: IDNG) currently trading at $3.73 at a market valuation of around $90M and averaging about $5 to $10M in dollar volume per day. This type of valuation and market activity would lead the average investor to believe that this Company must be a serious mover and shaker with a team of skilled professionals doing $10's of millions in revenues.
Looking at the Independence Energy, Corp's recent filings points to quite a different story indeed. As per their latest 10Q the company has $2,051 in the treasury and $0 revenues to date. They also state that the company neither owns nor leases any real or personal property and that they pay $125 per month for use of office space and services. One might also note that they are currently behind in their $125 per month rental by a total of $425. As well Bruce Thomson, the CEO of Independent Energy, Corp remains the sole officer, director and employee of the Corporation.
Conclusion: I will say it again; Independence Energy Corp. biggest project by far seems to be the multi-million dollar stock promotion" Now that they have announced a 5 for 1 forward stock split and the promotion seems to be in full swing there is definitely a very good chance of continued upward movement in the short term. In the long term things do not look so good however. One does not have to look far to learn that these heavily promoted stocks tend to collapse just as fast as they rise and IDNG and its $90M valuation will be no different. Once the hype is over and the stock loses that steady upward momentum that has continued to lure unsuspecting investors in, Independence Energy Corp cannot maintain anywhere near its current market valuation. One day soon, this one too shall fall, and fall it will.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.