SunWorks Inc (SUNWQ)

[SandridgeEnergy]

Enjoy the ride up and don't short it, certainly not yet anyways...

...but don't forget this is all about trying to raise money to pay off the loan next year.


I've said before that the best time to go long certain companies is right before they would go bankrupt. First of all you can squeeze out shorts who foolishly invest based on things like fundamentals alone. Second, time and time again these types of stocks surge upwards just before they need to raise money.

That shelf offering tells you everything you need to know, dilution is coming and it's going to hid hard and fast when it does. Just to pay off the loan will probably be around 25-30% dilution. Cash is perilously low. Even without the loan working capital is in the red, and it looks like the company has had trouble finishing up some of their jobs based on Q1 results. In order to get enough cash to operate properly after that will likely be more. The CEO is personally on the hook for that loan, so it's not just the company that might go bankrupt if the offering doesn't work. None of this matters in regards to the share price on the way up. All of this promotion isn't about getting to a certain price, it's to create trading volume in order to demonstrate a viable and deep market for the stock so those participating in the upcoming below market follow-on feel they can conformable dump their shares ASAP onto retail investors.

The people getting in (and back out) now are short term traders who buy based on some random lines on a chart drawn by some fake guru who gets paid on the side by the companies he talks about.