CrowdGather Inc (OTC:CRWG) might appear to be getting better as the company recently secured $7.85 million PIPE financing, but they still rely on old ways of advertising their business to investors – namely, using stock promotions.Right after the trading session ended on Friday, CrowdGather announced the closing of the $7.85 million financial transaction. Apparently, institutional traders think the forum based business of CRWG is worth their time and money. The premise to the deal was disclosed on Feb 28, 2011, but caused no share price reaction on the market.
7.13 million shares were sold at $1.10 to raise the capital. This represented nearly 22% discount to the current share price. Moreover, 5.35 million warrants were sold, allowing to purchase additional shares at $1.50 PPS. Exempt offering of securities was registered with the SEC on Friday.
Apparently, there are many parties interested in getting this news spread as quickly as possible. The Bull Report and Investors Hub were paid to promote CRWG since the news on funding came out. Over $15 thousand were spent on these email campaigns.[BANNER]
The fact that CrowdGather deals with promoters is not new. Apart from the paid promotions in the recent few days, the company was constantly featured on numerous newsletters over the last few months, and this constant flow of newsletters appears to be rather beneficial to the stock price.
So does the company justify its inflated stock price now that it raised $7.8 million? Working capital was always a problem for CrowdGather’s management, which is now apparently solved for at least a year or two, depending on the needs. It should help to further boost revenues, which had already been increasing throughout 2010. But, so did the losses from operations.
It is questionable if the share price can pick up to this development. The continuous promotions helped to keep it inflated throughout times much worse, and frankly there is not much upside to achieve from here on. The market cap is already at $65.5 million and the recent capital raise just diluted the shareholders further. Since most of CRWG’s assets are intangible, their net worth is less than $9 million, including the recently raised capital.
