After the enormous 350% gain on Monday, HNHI closed the session with a 23.08% drop down. The stock closed the market at $0.3 and the trading volume of almost 6 million shares was also very extraordinary for the rarely traded stock of H&H Imports. All points that the sudden breakout has been provoked by promoting alerts, and especially by the expected recommendation of rapper 50 Cent.
The promotion was not paid for, according to the promoters’ disclosures, though an SEC filing from mid-December last year shows that 50 Cent, known also as Curtis James Jackson III, has made a significant equity investment in the company. As President, CEO and sole shareholder of G-Unit Brands, Inc., the rapper purchased units consisting of shares and warrants in a private placement and as of the date of the filing he owned about 13% of HNHI issued and outstanding shares.
The exact details of the deal show that Mr. Jackson purchased 7.5 million units consisting each of one share of common stock and three different warrants to purchase one share of common stock at prices ranging from $0.15 to $0.50 per share. Price per unit was $0.10 and thus the total investment made by the rapper amounted for $750,000. It looks like the warrants have also been already exercised as the reporting person declares to own 30 million HNHI shares and to be also aiming a seat at the company’s Board of Directors.
However, it remains unclear if traders got actually so excited about the future of H&H Imports, or were just hoping to grab some quick trading profits on the star advertising that led to the incredible overvaluation of the stock. The company reported total assets of around $1.6 million at the end of June 2010, mostly in cash. The financial results are also not that glamorous: the total revenues since inception of around $820,000 could not even exceed their costs of over $930,000 for a gross profit and the total accumulated loss was over $3.3 million.
