First China Pharmaceutical Group, Inc. (OTC:FCPG) announced that new distribution agreements have been signed with three hospitals in Yunnan Province. In addition to expanding their market share, the company also decided to increase their share price through promotions.According to the disclosures on stockpromoters.com, Capital Financial Media paid the promoters $20 thousand on behalf of FCPG. In another notice, Small Cap Fortunes has received $250 thousand for their advertising services.
While there is nothing wrong with advertising in general, the stock price of penny stocks usually becomes over inflated and volatile after such e-mail promoting campaigns. The company already holds $57 million market cap and their net worth is unclear since the acquisition of First China Pharmaceutical Group Limited.[BANNER]
The development stage company will certainly benefit from the new distribution contract, but it’s unlikely that the firm with no recorded revenues and hardly any capital will take a significant part of the market. Yet, they are the only American company to have Government approval to fill orders over the Internet.
Their next milestone should be the fund raising, as First China’s latest quarterly report showed they have virtually no cash reserves. The capital will likely come from equity sales, unless the management will take their time and find borrowing opportunities. A company with no historical revenues is, however, not the most trusted entity to get a bank loan.
