CrowdGather Inc (OTC:CRWG) bounced the support once more, showing traders still believe in the troubled company and their CEO.
The stock price refuses to go below 85 cents per share as the company retains long term debt-free balance sheet and manages to raise private capital to continue their business. Still, the market capitalization of over $40 million looks exaggerated and unnatural for the business that strives to secure additional capital every half a year and barely retains any tangible assets.
CrowdGather recently made their business look a bit more attractive by securing $1.3 million through the sale on convertible preferred stock to foreign investors, which was announced on October 29, 2010. The new funds should last them for around two quarters, considering the average cash burn rate. When commenting on the new funding round, the CEO, Sanjay Sabnani, didn’t mention any other plans for this capital, besides general business expansion.[BANNER]
While there is nothing wrong with the public company obtaining additional funds through the sale of equity, third parties often pay promoters to boost the share price and get a better pricing on the stock they’ve received from Crowdgather. It happened numerous times throughout 2010. As these promotions only provide a temporary boost, the share price remained on a general downtrend for the most of the year.
The news funds could delay a further depreciation in CRWG share price, which has been notably forming a descending triangle over the past 4 months. Such a technical pattern is often followed by a price breakdown.
