Make Sure Your Money Isn’t Absorbed

Jul 27th, 2009 – Comment

  Hi Lou, Could you please give me your thoughts on Spongetech Delivery Systems (SPNG-Q2)? Your opinion is always valued. Thanks, Ken   Hi Ken, Thanks for the assignment. I always like looking at a company that I have never heard of just to get a sense of how people spend their time coming up […]


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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sponge

 

Hi Lou,

Could you please give me your thoughts on Spongetech Delivery Systems (SPNG-Q2)? Your opinion is always valued.

Thanks,

Ken

 

Hi Ken,

Thanks for the assignment. I always like looking at a company that I have never heard of just to get a sense of how people spend their time coming up with a better mouse trap. I have to tell you that from a product point of view you have to like what Spongetech has developed. A sponge with soap already infused within the product so all you need to do is find some water is an improvement over your average sponge. But does that make it a good investment?

The first thing that I looked at Ken was the fact that it trades on the Nasdaq Bulletin Board. As  I have mentioned in the past and will do so every time I am asked about a stock trading on the BB, the BB is a higher risk environment. Less regulation and oversight always puts a caution flag on the track for me.

The next thing that I looked for was the number of shares issued. As of the companies last quarterly report there are 1,096,245,460 shares. Over a billion shares issued for a stock trading at less than $0.20. Thats a lot of wolves that will be tearing at the earnings when they are earned.

The same report indicated that SPNG is seeing very healthy sales growth as they continue to expand their distribution into retail chains. Their accounts receivables are high and something that has to be watched to make sure that they come in on a timely basis.

spng

 

The three year chart shows a big spike off a rock bottom and a subsequent pull back.

 

 

 

 

 

 

 

 

 

 

 

 

 

spng2

 

You can see that as SPNG hit the highs in mid June that the RSI indicated an overbought situation and the MACD had turned down.

 

If you are going to take a position in this company Ken, you have to do so knowing that its a pure speculation. I highly recommend that you read the companies SEC filings to get a better sense of how they are performing.

For my money, its on the wrong exchange, has too many shares outstanding, and the accounts receivable are high.

 

Happy Capitalism!

 

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