ABRW - A sure fire winner or just another OTC hype job

So, is ABRW a slam dunk guarantee to go up from current levels?

Of course not, only complete morons would suggest that any stock comports zero risk, especially an OTC penny stock.  Well maybe not just morons, there might be some sharpies out there who are hoping to get potential marks....uhm, I mean investors, to completely ignore any potential downside.

When it comes to investing there are tons of people out there who will throw money at a good story, without being aware of the potential risks involved.  A great example would be Fuse Science Energy drinks a few years back.  When Tiger Woods signed on with them many thought it was a sure winner. 

If you want to check how its doing now just look up it up, fittingly it trades with the symbol DROP because that's exactly what the share price did.  Once worth dollars it now trades for less than one single penny.  (QUOTE FOR FUSE SCIENCE)

Know the risks people.  I will share a video from the Simpsons, one where Homer jumps into stock ownership when he is blown away by a presentation done by a company called Animotion.

Is that you?  Thinking only of the possible rewards and completely ignoring the risks?

So what are the risks?  If you came across ABRW via social media or from an email blast you might think there are none, that an investment in Búcha Inc is a sure fire rocket trip to the moon.  

Let's take a look at the company's most recent filing.  It isn't audited, but with OTC companies that comes with the territory and is one of the reasons stocks trading on the pink sheets have a less than stellar reputation.  

Here's a link to the most recent 10Q, for the period ending March 31, 2016:

http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=11366874

In the filing you will find this:

• The Company had an accumulated deficit of $3,619,669 and $3,331,878 as of March 31, 2016 and December 31, 2015, respectively, had net losses of $287,791 and $72,022 for the three months ended March 31, 2016 (Successor), and for the three months ended March 31, 2015 (Predecessor), respectively, and had negative working capital of $98,811 as of March 31, 2016.  These matters, among others, raise *substantial doubt about the Company's ability to continue as a going concern. (*emphasis is mine).

Another pertinent fact in my opinion is share structure, specifically the number of authorised versus outstanding shares.

• Common stock, $0.001 par value, 50,000,000 shares authorized; 15,435,651 shares issued and outstanding

Shares represent capital, when a company has negative cash flow from operations they can use shares to finance things like employee compensation and bonuses, as well as acquisitions and other general purpose needs.

Alright, I can just hear promoters and touts pounding the table screaming: 

"THAT'S OLD INFORMATION"!!!

That it is, and as such I consider it to be priced in.  I often share the view that all publicly available data, news, filings and everything else, that's its already "baked in" to the share price.  Stocks trade on supply and demand, not on old information.  

So what's the news that caused ABRW to go from a 52 week low of 19 cents to a recent high of $1.96?  A gain of over 900% in a little over three months?. That news came out of May 23rd, announcing a merger with New Age Beverages/Xingtea Group and judging by the volumes a lot of buyers stormed in.

https://finance.yahoo.com/news/b-cha-inc-signs-merger-130000897.html

The press release refers to New Age Beverages as a highly profitable "$50 million" privately owned company.  Because its a private company I know of know way to determine on what basis this $50 million valuation is determined.  

Interestingly the total purchase price is listed as being $19,995,000 in the form of an initial $8.5 million in cash, an issuance of $6,995,000 in common stock and finally a deferred cash payment of $4.5 million.  

It would seem that this is quite a coup.  A $50 million company being acquired for just under $20 million.  Not a bad deal for the buyers.  But again, I can't find anything to justify the $50 million valuation cited in the PR.

Bottom line

I'm not convinced.  With all the hype and forward looking, safe harbor protected promise it is my opinion that those who've been buying recently, at or near the recent highs, that over the long term they're going to see their shares fall significantly in value.

Do note however that my opinion is based on the long term, and in the short term I fully expect there to be a lot of up and down volatility.  Given all the pumping in social media I am betting ABRW will have some big swings, both up and down.

I also expect those who are pumping, that they will be touting long term potential, trying to entice buyers on the way up on promises of riches.  And on the way down they'll blame short sellers and manipulation, exhorting those who get trapped at higher prices to average down.  "It was a great deal at $1+, its a steal under a buck".

And I'll bet dollars against donuts that I will come under attack, for this blog to be ridiculed and trashed.....It comes with the territory.  I'm not a broker dealer, nor am I qualified to give investment advice.  I'm just a retail schmo who's been around the public markets for over 20 years, a guy who used to work in the investment sector whose sharing his opinions and views about how the market game gets retail sheep to buy high while the smart money players sell high.

In my opinion this is a text book example of the Greater Fool idea being played out, and its a zero sum game.  Some will end up with shares when its all over and some will have cash.  Good luck

Full Disclosure

I have no position in ABRW long or short and absolutely zero intention of ever taking one out.  And given that his is an opinion piece it is possible that my opinion could prove to be wrong.