One of last week’s top favorite stocks on the OTC Markets, iTalk Inc. (OTCQB:TALK), seems determined to build on the hype which has already possessed many investors and has resulted in a huge jump in the company’s share price.
Over the last week, TALK stock was supported by considerable amounts of daily dollar volume, which sent the stock firmly in the front-lines of the most traded OTC stocks lists. The increased investment interest in the stock was created by a sequel of press releases that gave a bullish impetus to TALK, which was just making its first trading steps under the company’s new symbol and name.
The trading with TALK stock was excessively intensive on April, 26th when the company announced it had engaged Experience Advertising Inc. to assist in building up TALK’s future marketing strategy. On the same day more than 7.7 million shares of TALK common stock changed hands while the share price rose 25% as compared with the previous close.
Although the trading volume decreased to a certain degree in the following sessions, there was enough demand of TALK stock to push its share price even further up the chart. Thus, at the present moment we can see the stock trade at $1.2 per share which is a remarkable increase compared with where the stock started at its first trading day on April, 25th, viz. $0.6 per share.
Apparently the company is making a good use of its PR machine since it has managed to keep investors’ interest for some a while. In this respect, a more substantial press release was issued last Friday which announced the acquisition of RocketVoIP. This news somehow enhanced the notion of investors that the company may really be determined to carry out its business plan, unlike many other failing penny stock companies.
The idea of iTalk Inc., which is a development stage company working in the field of mobile communications, is to launch a nationwide mobile broadband wireless data transmission service that will be offered at low cost, no contract and various data plans. The company expects that the low price of its service will severely undercut major national carriers.
TALK was previously known as Sopac Cellular Solutions Inc. which was established in 2006. In December 2012, the company merged with its subsidiary iTalk Inc. and acquired its name. On the same date TALK executed a 25-to-1 forward stock split which increased its number of authorized shares to 1.8 billion.
While the story around the company’s recent initiatives may really sound inspiring for many bullish penny stocks investors, there comes the moment when they should ask themselves how the company would finance its great ideas. And here the picture isn’t rosy.
According to the last financial report of the company, it currently has only $380 in cash and a working capital deficit of $82 thousand. Of course, the company can issue additional stock to fund its future projects given that it presently holds 42 million outstanding shares and it is allowed to issue 2 billion. Unfortunately, this would undermine the value of TALK’s shareholders investments, unless there is enough demand to buffer the dilution of the equity financing.
In fact the equity financing has already been started as the company had issued 500 thousand common shares with regard to the RocketVoIP deal.
In the end there is also the concern that the company is nearing $50 million in market capitalization which is foddered only by the hype created by the recent press releases. In fact today we have spotted that stock promoters are also joining the buzz around TALK, which may or may not be a positive sign that can artificially inflate the stock even more.
And given that the trading volume is starting to subside to a certain extent, the chances for a correction in the short term are getting higher. As to the long term perspectives of the company, we are yet to see some tangible signs of growth in the forthcoming financial reports of the company. Otherwise, it is mostly buzz and speculations which are driving TALK stock up at present.