DS Healthcare: Look for 60-70% Drop On Equity Offering, Accounting Problems and Solvency Concerns
- Stock has risen by 500% in 2015 due to overly promotional press releases touting “profitability” as well as appearances on microcap promotion networks
- Auditors raised “going concern” warning and multiple weaknesses in accounting internal controls
- Company is out of cash and desperately needs to raise money in the near term
- Recent resignation of audit committee head
- Despite promotional press releases, business is stagnating and continues to lose money
Microcap stock promotions (mostly targeting retail investors) have the potential for explosive stock price appreciation. But when they finally implode, the drop can be swift and brutal. The last microcap stock promotion I exposed was Chanticleer Holdings (HOTR), which owns the rights to several Hooters franchises in the US and abroad. That stock had more than doubled to over $4.00 on the back of numerous promotional articles and press releases, which all ignored the company’s poor underlying financial condition and prospects. Following my article on Chanticleer, the stock is now down by more than 50% and is closing in on 52 week lows. Despite its previous highs of over $4.00, the stock is likely to fall below $1.00 by year end.
Even after I exposed this promotion, we can see numerous comments from small retail investors who refuse to believe that they have been caught up on a stock promotion. I would encourage readers to view the comments posted below my article on Chanticleer to see just how “taken in” retail investors can be with these stock promotions.
DS Healthcare (DSKX) bears many similarities to Chanticleer. Like Chanticleer, we are almost certain to see rapid declines in DSKX of 60-70%. DSKX was trading at well below $1.00 for the earlier part of 2015 and the company was quick to sell new shares at a price of just 50 cents in April. As shown below, DSKX is likely to fall back to below $1.00 by year end based on multiple negative catalysts.
Much of this increase has been driven by an endless stream of promotional press releases as well as numerous appearances on promotional interview websites such as “Corporate Profile” and “Newtothestreet TV.” Corporate Profile is a quasi-IR firm that describes itself as “a broadcasting website where Fashion meets Finance; merging two mainstream industries and creating a unique platform for investors to stay up-to-date on today’s news, tips, interesting companies, and market info.
It covers mainly crummy microcap companies that appear to be in need of financing, much like DSKX.
DS Healthcare is a South Florida based marketing company which sells skin creams and hair growth products. DSKX sells its products through distributors in the US and abroad. Around 60% of its revenues come from international distributors. Looking into these distributors raises questions about how DSKX can be generating this revenue.
DSKX has consistently tried to portray itself as “profitable” by focusing on a made up accounting term called “adjusted EBITDAS” which basically excludes nearly all expenses from the bottom line. The reality is that DSKX continues to lose money and burn cash.
Exploring the distributor issues takes some digging and will be addressed below. But first, there are many more obvious problems which show why DSKX is set for a rapid and steep decline.
You can read the full article here on SeekingAlpha