Kingold Jewelry Inc. (OTC:KGJI) recent plans to qualify their stock for the NASDAQ appeared to be going successfully on over the last months. Especially after a well compensated stock promoter came in to provide investors with their next “gold” investment opportunity.Yesterday the stock gained 9.43% to its value and closed at $2.90 for a share. On no recent events, the volume suddenly exploded over the last two days and yesterday over 140,000 shares were traded. It seems like investor interest has been provoked by an article, published on Tuesday, in which Kingold Jewelry and its stock have been presented as a “potential ten-bagger”. To be even more convincing in his arguments, the author states he will go long KGJI straight after the article is published.
But it will not be the first time as some advertising has had positive effects on the stock. Rarely traded over the last three years, the demand activated in April this year with the only relevant event at that time being the disclosure of a stock promotion.
A stock promoter is receiving from the company a monthly fee of $10,000 in cash for twelve months, in which advertising materials for KGJI will be distributed to investors. Further, the promoting company received a total of 100,000 restricted shares of common stock. Results look satisfying, the stock now trades above its 50-day moving average and far above its 200-day moving average, and is strongly overvalued in its P/S and P/B ratios.
Though, the management looks still unsatisfied with the current trading levels, and as the state of the business may not allow for fast improvements with the over four times lower revenues in the first three months of the year as compared to the previous quarter and less than half of the previous net income, a one-for-two reverse stock split is planned. It is also approved by the majority of the company’s stockholders, though since then there are no filings related to that matter.
Some further plans about the stock are also still pending. For example the planned offering of new shares for proceeds of $25 million, for which a preliminary prospectus was filed in June, and the application for listing on the NASDAQ Global Market. Of course, the number of shares to be issued will depend on the price that investors will be willing to pay. Thus, on the dilution question, promoters’ and investors’ interests may exceptionally coincide.
The now “leading designer and manufacturer of 24-karat jewelry in China” Kingold Jewelry Inc. was known as Activeworlds Corp. until February this year and it provided software products. Obviously, the company missed then its goal to become “the leader in three-dimensional Internet virtual environments and interactive communication”.
