Spongetech Delivery Systems, Inc. (fka SPNGQ)

[ErJ]

Seeking Alpha article on SPNG:

http://seekingalpha.com/article/160829-readers-ask-sponge-tech-telanetix-trubion-pharmaceuticals?source=yahoo

SpongeTech (SPNG.OB)
Here's my problem with the Spongetech move. They should have gone 1-10. By going 1-100 they take themselves out of the "speculators" domain. If I am in SPNG (which I am, avg .11), I am looking for a big hit. I don't want to buy SPNG at $14.00 a share! I'll take a potential ride up from $1.40, but no way am I buying at $14 when I don't know if as you say "the products are going to take hold". It would have to hit $100 a share to make the big hit I am in for. I sold half yesterday at .155 and may sell the rest. This is not a potential homerun anymore.

VFC's Take: I do see this poster's point, however the outcome does not have to be quite so bleak. The market cap is not going to change as a result of the reverse split, so if sales growth can support a higher market cap, then the stock price is going to rise the same amount (in terms of percentages) regardless of the price for which the stock trades.

By doing a 1-100 vice 1-10, the company is trying to weed out the speculative traders, in my opinion, and keep the long term growth investors. If the company can grow the business and sell the products then investors will be rewarded in the end.

As for the potential of a ten-bagger here, a ten-bagger from this point would mean a market cap of roughly one billion - regardless of whether the stock trades for ten cents or ten bucks. That is a bold prediction in any case, but if Spongetech can generate sales that support such a high market cap, then the stock will trade accordingly; again, I emphasize, it's a percentages game, not a stock price game.

If you thought Spongetech would sell that much product, then it's just as much worth the buy on September 23rd as it is today. I understand the newfound fear of the potential downside, but if you're in SPNG for the future of the potential sales growth - nothing has changed. Don't alter the amount of money you put in, just accept the fact that you'll have far few shares in the account - the percentages will play out regardless of price.

I'm going to add shares now - pre-split - and if the stock dips significantly post-split, I may add again; then I'll wait and see how well these products catch on and hold the market place.

As for the "home run" call, in my opinion, if you can double your money in a stock - I tend to consider that a home run, especially when most of America is satisfied with a 15% annual gain in a mutual fund.

I still think that SPNG could eventually be at least a double, even after the reverse split. For that potential double - I'll hold.

Disclosure: VFC is long SPNG.