A month ago, NutraCea (PINK:NTRZ) – the protagonist in today’s story – was charged by the SEC with engaging in a fraudulent accounting scheme adopted by former executives back in 2007. The scheme aimed at inflating NTRZ product sales revenues, thus taking advantage of improper revenue recognition practices.As disturbing as the above mentioned may sound, the influence it exerted on the market performance of NTRZ stock was nothing short of insignificant. On the contrary, with minor exceptions, the company’s stock has not only been on the increase for the last six weeks, but it has also maintained consistent turnover levels. The upward trend was borne out yesterday, when NTRZ stock gained additional 13.7% in value and closed at an all-time high of $0.365, with staggering 1.4 million shares changing hands.
The main reason behind the fairly positive course of events following the initiation of SEC’s investigation might be largely due to the prompt reaction of both the former executives and the new management team of NTRZ. Instead of kicking up a huge fuss about it, the parties reached an amicable agreement. To a certain extent, this outcome has helped the company to start life again with a clean sheet. That is why when NTRZ announced the completion of a JV with AF Bran Holding LLC the news was met with success, without the help of any promoters whatsoever. [BANNER]
So far, investors seem to be full of enthusiasm for NTRZ stock, as if the company is the next big thing in the industry. However, on Nov. 18, 2010, NTRZ managers stated they had yet to prepare the company’s 2009 and 2010 financials as they had been too busy restating the financial statements for the year ended Dec. 31, 2007. So far, so good. Yet, it is hard to explain why today, three months later, no current financial reports have been submitted.
At present, traders seem to have put their trust in NTRZ stock. As it is, they are still on a winning streak. Unless the company provides current information about its financial state, the bubble will most likely burst, plunging any profits accumulated in the meantime.
