Question: Stock question...company stock buyback of a new to market stock?
I'm researching a new mining stock that has been on the market for about a week...today after the market closed they announced the cancellation of 80 millions shares of stock. They have been approved for a 1 million dollar line of credit and have 40+ new claims. Should i interpret the cancellation/buyback as a good sign, the company investing in themselves. Generally a buyback/cancellation like that should make a spike in the price per share...??? Let me know what you guys think. So far it's started at about .25 per share mon-tues and now it's holding around .32-.36....will this new (that came after market close) make prices jump tomorrow? Current trading volume is around 200 million since it went on the market?
Answer:
Well give us the stock symbol and then maybe we could give u a better opinion.
it could. it could also go down to 0 depending on how liable the company is. how volatile is the stock? and if you decide to buy dont buy more than 200 shares unless you have a lot of money to risk
I never buy stocks that are new, they have no history to show their acceptance by the market.
<<<Should i interpret the cancellation/buyback as a good sign, the company investing in themselves. Generally a buyback/cancellation like that should make a spike in the price per share...??? Let me know what you guys think.>>>
Buying back shares is usually considered a good thing, but not good enough to cause much of a spike since the size of the buy back is usually relatively small.
If the case of NSRS they are NOT buying back any shares. Instead, the company's ONLY full time employee is giving back 80,000,000 shares, quite possibly so that the company can then reissue them and sell them. Here is what the 8-K filed with the SEC said:
"On December 28, 2011, North Springs Resources Corp., a Nevada corporation, (the “Company”) requested and instructed their transfer agent to cancel eighty million (80,000,000) shares of the Company’s common stock (the “Shares”), which were previously issued and outstanding and held by the Company’s sole officer and director, Mr. Harry Lappa. The Company’s transfer agent cancelled and returned the Shares back to authorized but unissued status. Accordingly, the Shares shall now be available for issuance by the Company."
http://yahoo.brand.edgar-online.com/disp…
I am also not aware if you know that the "up to $1,000,000" drawdown note can, if the lender so chooses, be paid off by issuing additional shares to them at a 25% discount from the market price.
http://yahoo.brand.edgar-online.com/disp…
It is an interesting company. I have seen publicly traded companies that had fewer than 10 employees before, but this is the first one I have seen that only had one full time employee. I don't think I have ever seen a company before where the amount of cash available at the end of the last quarter was $16.
The following paragraph from the latest 10-Q was also interesting.
"These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated significant revenues since inception and is unlikely to generate significant revenue or earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As at October 31, 2011, the Company has not generated revenues and has accumulated losses totaling $129,781 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern."
I am pretty sure I have never seen a 10-Q say that to survive it depends "upon the continued financial support from its shareholders" among other things.
http://yahoo.brand.edgar-online.com/disp…
Putting it all together I know I would be out of my league if I tried to evaluate this company. I am, however, pretty sure a "buy and hold" investors will probably lose his entire investment but, if he doesn't, he may have profits many times his original investment.