Apr 29, 2012 4:10 PM | about stocks: CDTI
If you are an investor or trader who is contemplating buying shares of Clean Diesel Technolgies, I urge you to carefully consider the companies past actions to share holders. It hasn't turned a profit ever in it's history up until Q4 of 2011. And even that was borderline iffy as they used a special tax credit to show profitability.
Since the company's reverse merger back in October of 2010, CDTI's stock price has tanked. As it turns out CDTI became the best short of 2011, even after the superman short squeeze, when the stock traded as high as $44 dollars, the price then fell to a mind crushing $1.50. So what's the reason for this? And what is management exactly up to?
Many investors I know have a scathing perception that the company's reverse merger was a complete sham, it's only intentions were to get the stock price up in order to comply with Nasdaq regulations to remain listed on the exchange, as well as for their eventual public offering in July. Furthermore, after the July offering, management had the nerve to do another secondary offering 3 months later, in October. The company nearly went bankrupt then (even after raising 10 million dollars prior) had it not been for a Special Situations funds to step in and save it. That fund now owns 15.5 percent of the company and based upon filings by the SEC continues to sell into any rally, sadly constraining the stock price. On top of that came the Lincoln Park Capital purchase agreement, (their insurance policy or last resort) which offers LPC the right to by up to another $10 million dollars of CDTI stock. AND on top of that, according to their latest Proxy statement, the company plans on double the amount of shares from 12 million to 24 million, for "flexibility purposes." Be prepared for more dilution, and minimal press releases by management.
So to conclude, don't be fooled by their story of the California market and their plan to pursue an "organic growth" strategy from retrofitting 100,000 trucks per the next three years. Management and their Sales team are ridiculously incompetent when it comes to "growing" a business. This company taps too many credit lines, and converts to many notes, and dilutes too many times to remain in the game. Just look at the chart, the market never lies. Short this junk.
Disclosure: I am short CDTI.