Over the last two weeks, the Texas wireless services and products provider ERF Wireless,Inc.(OTC:ERFW) experienced an unprecedented development on the stock market. Yesterday alone, the volume of traded shares exceeded 9.6 million. An all-time high, but not the first one this year. Last Tuesday, the volume was a bit smaller – 8.9 million, but still far above the past performance of the company. All in all, the year for ERF started with $0.012 per share and yesterday`s session closed at $0.03, so the positive trend might continue next week, too.
Now, the immense trading activity that led to the increased price was caused by official announcements from the company, coupled with rumours and speculations over the Internet. On Tuesday, the company released information about the latest development of its wholly-owned subsidiary Energy Broadband Inc. It was stated that EB has recently initiated broadband wireless services to the Eagle Ford Shale region for the drilling operations of a new major worldwide independent oil and gas company. Of course, this sparkled a notion of optimism among investors, but not as much as the official announcement yesterday, when ERF stated that the company has received a notice of a second award from the U.S. patent office.
While both announcements might seem as a good reason to buy ERF shares, the booming volume during Thursday`s session has nothing in place to justify it, at least at first glance. There were no promotions, no announcements, released financial statements etc, only rumours about upcoming contracts with huge US corporations that are backed up by no evidence whatsoever.
In fact, ERF is in need of both. The stock of the company is doing well presently, but it is far beyond the price of the beginning of 2010, let alone it used to be close to $3 per share in 2006. And one should not neglect the company’s financial statements. The last 10-Q report covering the first three quarters of 2010 is not much of a reason for joy among current stockholders. According to it, the total current assets amount to $970 thousand and a total loss for the period in question comes close to $2.3 million. Now, when these numbers are combined with an accumulated deficit of $45.5 million, it is clear why not all traders share the joy from the recent developments. It is changes in the balance sheet that can reverse the negative trend of last year and bring back confidence in investors. Every other news, rumour and speculation, no matter how positive, are set to have a short-term effect on the market.
