Note: This article is about a nano-cap stock (also referred to as a "penny stock"). While all investments are risky, nano-cap stocks are among the most risky. Among nano-cap stocks, the most risky stocks are those, which are subject to promotional campaigns (such as MEDA). They are also among the most illiquid stocks, usually having a large spread between the bid and offer at any given moment. Quite often, it occurs that the illiquidity of these stocks does not allow a trader to rapidly close or open a position. MEDA is no exception to that. MEDA is a nano-cap stock which is traded on the OTC Markets and priced well below the 1$ mark. The readers of this article should be highly aware of the aforementioned facts prior to undertaking any action based on the content of this article.
Media Analytics Corp. (OTCPK:MEDA) is a company trading at a price that has recently run from a low of $0.02 to a high of $0.066 during a single trading session. In this article, we will outline the facts, which are, in our opinion, related to the sudden increase in the price and trading volume of this usually thinly traded, low volume stock.
Let us analyze the recent price action and trade volume of MEDA:
The trading volume and price of MEDA have both literally exploded on December 8, the date when the first promotional email was received. It is quite obvious that the email being sent out and the sudden rise in volume and price of the stock are interconnected events.
Emails received on MEDA:
(Editor's Note: MEDA closed trading Wednesday up $0.02, or 27.06%, to close at $0.11.)
The Reality: Zero Revenue, Negative Income, Bright Future?
As often happens with aggressively promoted companies, a glimpse at the balance sheet is often enough to reveal a grim and bleak picture. It seems Media Analytics Corp. is no exception to that rule.
In our opinion, it is clear that the price of MEDA has nothing in common with the stock's true value. If we were to take a look at MEDA's income statement, we would see that the company's revenue has remained exactly zero while the company's income has been negative during the entire year of 2014:
Moreover, if we were to take a look at the latest 10-Q form filed on 11/14/2014, we would see that shares of the company have previously been issued at next-to-nothing prices ($0.001) to insiders of the company:
With all these factors taken into account, it should come as no surprise that according to the same 10-Q form filed on 11/14/2014, the company is actually classified as a going concern and has accrued net losses since inception (with all the attendant circumstances):
It is based on the aforementioned data that we firmly believe that MEDA's current line of business involves having its shares promoted and sold at over-inflated prices, rather than delivering or attempting to deliver a true product to the market. But why, you ask?
Why would any company need to have its stock ticker advertised? That is the most important question an investor should ask himself prior to buying a promoted stock. The answer for this hides, of course, in the small print. Let us have a look at the disclaimer found in the promotional emails touting MEDA, which we've received:
In simple, plain English: someone - maybe the promoter sending out the email message or a third party who might have paid the promoter in cash for sending the message - is holding shares of MEDA and plans to get rid of them ("dump" them) in the open market. Therefore, our conclusion is that the promotional email's sole purpose was to have unsuspecting investors buy the stock at artificially heightened prices, while the promoters (or third party) unload their shares upon them.
It is based on the aforementioned facts and analysis presented in this article we hold the opinion that MEDA shares are essentially worthless. We believe that the recent increase in the price of the stock has been a direct result of email messages being sent out by stock promoters in massive quantities and touting investors to buy the stock. This practice is well known (see Pump and Dump) and is done exclusively for one reason only - so the insiders can unload ("dump") their shares (which they had previously acquired for almost free) in the free market onto unsuspecting investors, while taking advantage of the stock's inflated price. In view of that, we hold the opinion that any investor who had purchased shares of the company should consider liquidating his entire position immediately. Even a small weakness in price could mean that the dump is nearing.
"He that lives upon hope will die fasting" - Benjamin Franklin
For longs: If you are long the stock, we believe you should consider getting out immediately. It is with full confidence we say that every upward movement in the stock's price is likely to be temporary, as it will never repeat its previous highs. We believe MEDA has a price target of around $0.001, which it is likely to reach in the upcoming weeks (or months at most).
If you have already accrued losses on the stock, it may be a good idea to sell now so as to avoid additional losses. Do not persuade yourself into thinking the stock price will come back to its previous highs. Do not have hope leaving you holding the bag as it has happened to far too many. We believe MEDA's stock price will drop 90% or more in the following weeks. It may be the right decision to minimize your losses by selling now.
"Profit is sweet, even if it comes from deception" - Sophocles
For shorts: Bearing the aforementioned facts in mind, we believe sophisticated investors will quickly comprehend the idea that shorting MEDA may be a lucrative opportunity, as we are convinced that the potential downside for MEDA is substantial. If you are able to locate borrows, we believe shorting MEDA may prove to be profitable, as its price may prove to be highly inflated.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.
Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.