ShaMaran Petroleum Corp (CVE:SNM) (PINK:SHASF) stock price gapped up out of the blue, but holds no serious merits to rally further up. Shorts could start using the opportunity anytime.
SNM stock price jumped up 10.4% during Thursday’s session, attracting a trading volume of 1.1 million. That was below the daily average turnover of 1.24 million and thus it seems it will not turn into a sustainable price rally.
The stock continues to dwell near its 52-week low at 20 cents per share, thus every larger price move could trigger a significant bounce up if it manages to squeeze out enough short sellers.
Most of the traders should have a bearish sentiment towards SNM. That is because the current market cap at $176.9 million is around three times their book value of $59.9 million, which is what you get when ignoring a couple of hundred millions worth of intangible assets.
Businesses with no revenues usually hold a market value no more than twice their actual worth. Any other cases call for stock price corrections, either gradual or quick, depending on the news.
In ShaMaran’s case it’s their solid cash accounts that help to keep the inflated pricing. Nearly $30 million in cash is a luxury for early stage exploration companies.
