Coverage from InvestorSoup and Skymark may get the penny stock rolling again.
It's been a very busy week for SpongeTech Delivery Systems, Inc. (OTC:SPNG) as a company; too bad it's not been a very profitable week for the penny stock's investors. Since Friday's close, shares are down about 20% (as of Wednesday's close). My initial expectation was for more selling, but after a glance at the chart, I'm now thinking that SpongeTech may have hit a short-term bottom. We'll know for sure in a few minutes.
My line in the sand (support) was 10 cents, which had acted as a floor in late June and early July. When it broke on Monday, I figured we were going to see this penny stock head south, all the way to the next support level at 3.3 cents.
On Tuesday and Wednesday though, we saw SPNG bottom at 7.8 cents both days, and we saw a decent push off that low by the time the closing bell rang. Those late rebounds - no matter how small - hint that somebody's going fishing.
The one thing current owners and buyers have going for them is yet-another wave of encouraging news from the company....
On Monday, SpongeTech announced that Skymark Research had initiated coverage of them. I tried to access the research, but the SMR website requires an account to view the data (and the last thing I need is another membership to an information-based site. If any of you have a Skymark account and want to share a little coverage of SpongeTech, please feel free.)
The most interesting part about SkyMark's coverage? According to SpongeTech's press release, SMR is NOT being compensated for it. That seems like a first for SpongeTech, who seemed willing to give shares to anybody willing to talk about them.
On Tuesday the company announced they'd established a presence in 7500 new retail locations. We don't know which ones, and we don't know how they got into them. Perhaps it was through the Dicon deal (though that would be pretty quick work). Either way, that's going to bolster the top line again, which is already swelling at a pretty quick clip. Congrats.
On Wednesday the company let us know that InvestorSoup.com has started coverage of their penny stock. This coverage wasn't directly purchased by SpongeTech either, but....
"InvestorSoup.com is a Web site wholly-owned by BlueWave Advisors, LLC, which has been compensated fifty-thousand dollars from Pine Mountain Ventures, a shareholder of SPNG, as a marketing budget to manage a comprehensive investor awareness program including the creation and distribution of this report as well as other investor relations efforts."
(Side note: All compensated coverage is at least a little biased, but bulls and long owners shouldn't complain.)
And finally, on Wednesday, SpongeTech filed the first actual 8K I can ever remember them filing (though they should have been all along). It was about the Dicon Technologies acquisition. It was a fair purchase....
"Pursuant to the Agreement, we acquired 100% of the membership interests in Dicon, for a purchase price of $2,350,000. In addition, we paid off Dicon's loan with Wachovia Bank, of approximately $2.2 million, and agreed to provide Dicon with (i) up to an additional $250,000 for Dicon's purchase of manufacturing equipment for a second production line dedicated to the manufacturing of our products, as well as (ii) an inter-company credit line of $270,000 for Dicon's general working capital needs."
I've made no bones about my opinion of the company in addition to my opinion on the stock, which are two different things. I think the company is doing well, while I think the stock is still subject to the whims of the speculators. As such, you can't yet 'invest' in this penny stock.... you can only trade it.
That said, the next trade will depend on whether or not this penny stock breaks under support at 7.8 cents or not. If 7.8 cents breaks down, I'm looking for that move to 3.3 cents.
If instead we see SpongeTech shares climb above 8.7 cents, I'll assume the sellers are through for a while and that the buyers are trickling back in (fueled by the latest salvo of good news). That could get the stock to 12/13 cents at least, in my opinion.
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