Yesterday, Dutch Gold Resources, Inc. (PINK:DGRI) sank down by 3% on a four times higher than the 90-day average volume. DGRI shares hit $0.0139 at the end of the session.
The reason why the stock tanked yesterday appears to be the announced increase in the number of authorized shares of DGRI. With 447 million shares outstanding, the company had nearly reached the limit of the previous number of authorized shares. The latest news from the company apparently gave enough reasons for investors to fear forthcoming dilution, which can explain why sellers prevailed in the last session.[BANNER]
The threat of dilution gets even more real when the last 10-K of the company is scrutinized. The company’s auditors have clearly expressed their doubt about DGRI’s ability to continue as a going concern. DGRI itself admits that it is unable to meet their interest obligations of more than $300 thousand.
According to the annual report, DGRI plans to raise capital by issuing debt securities, capital stock or a combination of these securities. However, the company admits that “we might be forced to sell shares at a depressed market price, which could result in substantial dilution to existing shareholders”.
On the background of all of these concerns, yesterday after the closing bell, Penny Stock Prophet launched a new promotion of GDRI, for which it was compensated $40 thousand. The third party which ordered the campaign was not disclosed in the letter. The influence of the promotion should be felt in the session today.
Even though the company is operating in the presently very popular gold sector, it hasn’t provided any signals that production and revenues will start any time soon. Thus, the more the exploration stages gets prolonged, the more DGRI will be forced to dilute the positions of those who have already invested in the company.
