Is the general stock market now so frothy that dubious penny stocks are rising from the ashes of the pumped and dumped?
I was shocked, shocked to learn this week that a derelict Canadian company is being brought back to life.
Let the penny stock investors beware.
Diamant Art Corp. (OTCPK:DIAAF) last month voted in a 5,000 to 1 reverse stock split. (Press release below).
This month a total of 4,400 shares have traded at prices ranging from 13 cents to a high of 49 cents a share, the price quoted for Friday, May 28, 2010.
At this point the worth of the company is murky.
According to a press release from Gibraltan (sic) Financial, Diamant Art had over 7.5 billion shares outstanding before the reverse stock split. My math and the corporate press release both indicate that would leave 1.5 million shares issued today.
At 49 cents a share that would roughly give Diamant a market cap of about $750,000.
However, a large U. S. discount broker came up with 428 thousand outstanding shares of DIAAF and a market cap of $208,000. However in another section this same brokerage said there is a float of 21.5 million shares, with 21.7 million shares outstanding.
This same brokerage firm - not to be blamed in any way because they are not promoting the stock but trying to keep up with thousands of listed and unlisted companies in a good faith effort to supply information - has apparently updated Diamant’s six year price history by incorporating the 5,000 to 1 reverse split into its data base calculations..
The brokerage firm, TD Ameritrade, in its 10 year graph available online Sunday, May 30, shows that DIAAF on May 1, 2004 DIAAF traded between a high of $2,200 and a low of $875, settling at $1,635 for the close.
Pretty wild trading range, huh? But again that was presumably adjusted for the 5,000 to 1 reverse split on April 28 of this year. This greatly amplified the actual price.
I am pretty sure the company never actually traded at $2,200 a share when it had more than seven billion shares outstanding.
Anyway, the chart shows a mostly steady decline since then with a few spikes.
On a Yahoo message board, one poster reported that he had bought 100,000 shares in 2006 for a half cent a share. That would be a $500 investment by my calculation. This investor was steamed early this month because the reverse share split reduced his stake in the company to 20 shares worth $9.80.
I have an interest in this stock because driven by greed I put a few hundred dollars into it years ago and saw it evaporate. These days I prefer to speculate in horse racing bets. I have sworn off penny stocks.
My original 3,000 share stake should technically give me a one share holding after the reverse split (because they are rounding up), but that share has not popped up yet in my account. Maybe because it would be worth only 49 cents.
I know Seeking Alpha investors are highly sophisticated and can get all the gambling action they crave in the options derivatives markets.
They would not be caught dead trying to make money on DIAAF against the savvy specialists in Toronto.
But anyone who wants to “invest” in DIAAF should review the latest available online financial results on record at Yahoo Finance:
Diamant sustained the following losses from 2005 through 2007.
Operating profits (losses).
Net income (loss) applied to common stockholders
2007 ($310,000) .
The company is described as making brush stroke replicas of famous artwork for export. It has two operating divisions in the film and bio plastics industries.
You might buy a product from this company. Considering how much it loses on operations its products could be bargain priced.
But would anyone buy the stock?
We will follow Diamant Art in coming months and see if people do.
The 2009 SEC foreign issuer report filed by Diamont shows the company chairman is Michel Van Herweghe. Maybe he has a strong following in the Canadian business scene.
The press release from Gibraltan (sic) Financial last month said:
TORONTO--(Marketwire - 04/27/10) - Diamant Art Corporation (Pinksheets:
On March 5, 2010 the Company held a Special Shareholder meeting in Toronto, Ontario Canada approving a 5000 old for one new reverse split and received in the excess of a 2/3 majority vote to proceed with the reverse on that basis. The Company had filed Articles of Amendment affecting the consolidation of the issued and outstanding Common Shares on the basis of one (1) new Common Share for each 5000 old Common Shares so that the 7,552,096,414 issued and outstanding Common Shares have been consolidated into 1,510,419 Common Shares. No fractional shares of the Corporation will be issued in connection with the consolidation and a shareholder who is entitled to receive a fraction of the share upon consolidation will receive the number of shares rounded up to the nearest whole number.
Diamant Art Corporation(Pinksheets:DIAAF - News), announced today that the FINANCIAL INDUSTRY REGULATORY AUTHORITY "FINRA" has confirmed the 1 new for 5000 old Reverse Split Corporate Action for Diamant Art Corporation. This corporate action will take effect at the open of business 04/28/10. The new symbol on this date will be DIAFD. The "D" will be removed 20 business days from April 28, 2010, and symbol will remain DIAAF according to FINRA.DIAAF - News), through its wholly owned subsidiary Diamant Film Inc. (http://www.diamantfilm.com/), is the world's first plasticizer-free and the first food wrap film that is environmentally friendly and recyclable. Diamant™ Film has recently received the ECO logo certified by the Environmental Choice™ Program. The Environmental Choice™ Program is North America's leading benchmark of environmentally responsible products and services. Bio-Plastics Film Inc. Diamant's Bio-Products contain Totally Degradable Plastic Additive. Unlike other plastic, once biodegrading is complete, all that remains is carbon dioxide, water and biomass, all of which are part of the normal bio-cycle.
Disclosure: Minimal Holding DIAAF.PK
Disclosure: Minimal DIAAF.PK