CDTI or clean diesel technologies, closed at 4.25 two days ago, in pre market this morning is was topping 7.6, a whopping 80% gain.
Why you ask?
They closed a share offering.
A share offering is done by a company to raise money, in this case CDTI raised 10mil by adding 3mil more shares to its float.
3mil shares at 10mil is $3.33 per share, now when you add 3 million shares to a float that is only around 1.5-2million then you are dilution current share holders by
150% share dillution !!!!!!!!
Why would you dillute your share holders this much if it wasn't essential to the survival of your company?
You wouldn't, which means that CDTI is barely getting by with the business model they have now.
They have no positive cash flow!
CDTI even acknowledges in their 10-Q that they doubt they will ever achieve positive cash flow."We have not experienced positive cash flow from our operations, and our ability to achieve positive cash flow from operations, or finance negative cash flow from operations, could depend on reductions in our operating costs, which may not be achievable, or from increased sales, which may not occur. "
"We will need to have additional sources of funding in order to conduct our operations for any reasonable length of time, and no such funding is yet in place or committed, nor do we have any assurances of additional funding ." from auditor’s report for the year ended December 31, 2010 includes a “growing concern” explanatory paragraph.
the majority of the tier 1 truck/engine companies (i.e. Cat, Cummins, Donaldson, etc.) develop & manufacture their OWN diesel emission products
Their technology is nothing special. Tier 1 companies have similar technologies and are significantly more advanced than that of CDTI. In addition, companies such as Caterpiller & Cummins have the vast resources needed for advanced R&D which is why they are developing new emissions technologies each
Also, there seems to be a lot of confusion by investors and traders that CDTI (Clean Diesel Technologies) is in the same market as CLNE (Clean Energy Solutions) WPRT , & other natural gas transportation companies. In reality, the market sector CDTI competes, diesel emissions, is in direct competition to the LNG Renaissance that the US is currently experiencing and what CLNE WPRT, etc are capitalizing on.
another great article outlining why this irrational 80% gain will soon envelop itself
"For example, if 1M shares were issued at $7/share, shareholders would be diluted roughly 25% in exchange for enough cash to get Clean Diesel Technologies through the next two or three quarters. This would put tremendous pressure on management to grow the company at a rapid rate, only to justify the financing."
Which brings me to my main point of Roth and their recent pump job.
Roth was given a large amount of shares at 3.5 during the offering, they also are a market maker for CDTI, which in turn allows them to partially control the market and run the price up, I was spammed with tons of pr email from Roth pumping CDTI
The kicker is that the day of the offering's ending, Roth upgrades CDTI to buy with a 9 target.